Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) Q2 2022 Earnings Conference Call September 7, 2022 5:00 PM ET
Company Participants
Christopher Morris – Chief Executive Officer
Michael Quartieri – Chief Financial Officer
Conference Call Participants
Jake Bartlett – Truist Securities
Andrew Barish – Jefferies
Jeff Farmer – Gordon Haskett
Andrew Strelzik – BMO Capital Markets
Chris O’Cull – Stifel
Brian Mullan – Deutsche Bank
Nicole Miller – Piper Sandler
Brian Vaccaro – Raymond James
Sharon Zackfia – William Blair
Operator
Good afternoon, and welcome to Dave and Buster’s Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask question. [Operator Instructions]
I would now like to turn the conference over to Michael Quartieri. Please go ahead.
Michael Quartieri
Thank you, Andrea, and thank you all for joining us today. Joining me on today’s call is Chris Morris, Chief Executive 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 like to call to 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 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 result contained in our earnings announcement released this afternoon, which is also available on our website. Also pro forma financials, including Main Event for the prior fiscal year and the current six month ended July 31, 2022 is available on Form 8-K filed with the SEC and available on our website.
Now, I’ll turn the call over to Chris.
Christopher Morris
Okay. Thank you, Mike. Good morning everyone or good afternoon rather. We are pleased to report solid financial results, as well as strong operational progress during the quarter as we brought together the Dave & Buster’s and Main Event organizations. As noted in our press release, we reported record quarter revenue and record second quarter adjusted EBITDA this period. We experienced strong guest visitation and spending across both brands this quarter. Our teams continued to deliver high levels of service to our guest, while simultaneously beginning the process of integration into one company. I want to recognize the efforts of our combined team as we work to capture the synergies from our combination and adopt best practices across our brands.
While we saw substantial headwinds during the quarter from wage and commodity inflation, we remained focused on driving revenue and strong cash flow, while aggressively working to mitigate inflationary pressures with operational efficiencies and appropriate pricing actions. We have significant upside potential and with our continued focus on innovation, growth and value creation we are determined to deliver on that potential. We are excited about the future of this new organization and look forward to sharing our progress in the coming quarters.
Okay, now let me share with you my impressions from the first 60 days as CEO of the company. My thoughts of the current environment and a few of our near-term strategic priorities. My primary focus so far has been centered on three near-term priorities. First, performing a deep dive into our store operations; second, getting an end up understanding of our guest; and third, driving the integration of our combined companies to establish a winning culture. Tony Wehner, our Chief Operating Officer and I just completed our field listening tour. We held meetings with over 300 team members, met with every general manager and sales manager within the Dave & Buster’s brand and visited over 30 stores. This tour enabled us to gain a hands-on understanding of our operations and to hear directly from our frontlines about our challenges, and more importantly, our opportunities.
I’m delighted to report that we have a passionate group of team members who are dedicated and eager to serve our guests and propel our leadership position and our category. We are working diligently to gain insights into our guest, supported by data and analytics to understand their desires and expectations to better align our product offerings and enhance our position in the market for both Dave & Buster’s and Main Event.
Our merger integration is off to a terrific start. We are ahead of schedule on our key timelines. We’ve already implemented over $11.5 million of annualized synergies to-date and increased our target from $20 million to $25 million. We’ve combined our corporate offices under one roof and the team is aligned and focused on delivering exceptional results. As our teams continue to come together and gel, we are capturing synergy opportunities, implementing best-in-class operating initiatives and leveraging the scale of our combined operations. As we look further into the future, the senior leadership team will be taking the next few months to build our long-term strategic plan based on the output of our in-depth work. After our Board approves our mid-range plan, we plan to host an Investor and Analyst Day in Dallas likely in late Q1 next year, where you’ll have a chance to meet the entire senior leadership team and hear more about our plans to grow this business.
Now let me touch upon recent trends and near-term operating initiatives. Our second quarter results clearly demonstrate that guests continue to visit and spend at a higher level than previously seen in either 2021 and 2019. While the special events business has yet to fully recover to pre-COVID levels, we are seeing meaningful improvement in booking trends and I’m optimistic that the comparisons will turn positive in the back half of this year. We are confident that guests will continue to visit our stores as we improve our offerings, increases the level of service and refresh our physical footprint where needed. While we still expect to see higher levels of inflation over the next few quarters, we have worked and will continue to work on offsetting these additional cost pressures, primarily in labor and commodities, as well as with synergies from the acquisition and other cost saving initiatives.
In the near-term, we are focused on a number of key initiatives. First, we are gearing up for a strong holiday banquet season in the fourth quarter. Our special events sales teams are focused and our operators are ready to execute. Second, today we launched our National Where Winners Watch Football Campaign featuring Kansas City Chiefs Great Travis Kelce. This national media campaign includes a national partnership with ESPN and includes spots airing on ESPN’s Sunday NFL Countdown, NFL Live, College GAME DAY, College Football Games, Sports Center and more. The campaign also includes a digital and social platforms like CTV, YouTube, TikTok and Twitter and is designed to drive awareness of Dave & Buster’s as a great football viewing destination.
We are also taking steps to strengthen our brand identities and on honing our customer communications and value proposition. An example of this would be our D&B Rewards Program, which continues to grow now surpassing 4 million members since its launch in November of 2021. Year-to-date, loyalty accounts for higher visitations, loyalty members visit two times per card, non-loyalty members visit 1.3 per card and they have a higher average guest check, 33% higher than non-members. Our loyalty members make up 5% of sales year-to-date and we are just getting started. Equally exciting is that our guests love using the D&B rewards.
As you can see we have significant upside potential and with our continued focus on innovation, growth and value creation, we can deliver on that potential. It should come as no surprise that I’m extremely excited about the future of this company. We are optimistic about the state of our business and look forward to sharing our ongoing progress in the coming quarters.
At this time, Mike’s going to cover our second quarter results. After that, I will return with some concluding comments. Mike?
Michael Quartieri
Thanks. As Chris noted, we delivered record revenue and adjusted EBITDA in the second quarter despite continued headwinds in the economy. We continue to benefit from a higher mix of amusements and a leaner operating model. While we are still experiencing pressures from wage and commodity inflation, we are working to offset these cost pressures through operational efficiencies, continued emphasis on achieving our synergy targets and thoughtful pricing actions. We reported record quarterly revenue of $468.4 million, an increase of 35.9% from the second quarter of 2019 and an increase of 24% from the second quarter of 2021. Main Event branded stores contributed $51.4 million of revenue during the quarter.
Comparable store sales at Dave & Buster’s branded stores increased 9.6% compared to the second quarter of 2019. Walk-in comparable store sales at Dave & Buster’s increased 13%, while Special Event comparable store sales declined 23.1% compared with the same period in 2019, but on a quarter sequential basis improved 11.5 percentage points compared to Q1 of 2022. Comparable store sales at Main Event branded stores for the period from June 29, 2022 through the end of the second quarter increased 29.7% compared to the same period in 2019. Walk-in comparable store sales at Main Event increased 34.9%, while Special Event comparable store sales declined 1.4% compared to the same period in 2019.
Operating income totaled $56.5 million or 12.1% of revenue compared with operating income of $79.2 million or 21% of revenue in the second quarter of ’21, an operating income of $46.2 million or 13.4% of revenue in the second quarter of ’19. Operating income during the second quarter of ’22 was negatively impacted by transaction costs related to the acquisition of Main Event, increases in preopening and stock-based compensation expenses and an impairment charge related to the closure of the Main Event corporate office in conjunction with our office consolidation. These increases as compared with the second quarter of ’21 totaled $19.5 million, all of which is included as an add-back to our adjusted EBITDA.
Net income totaled $29.1 million or $0.59 per diluted share compared with net income of $52.8 million or $1.07 per diluted share in the second quarter of ’21 and net income of $32.4 million or $0.90 per diluted share in the second quarter of ’19.
We reported second quarter adjusted EBITDA of $119.6 million or 25.5% of revenue, which is an increase of 39% versus the second quarter of ’19 and a slight increase from the second quarter of ’21. Adjusted EBITDA in the second quarter of 2019 was $86 million or 25% of revenue and adjusted EBITDA in the second quarter of ’21 was $119.2 million or 31.6% of revenue.
We generated $84.5 million in operating cash flow during the second quarter. We ended the quarter with $591.8 million of liquidity, which consisted of $100.4 million of cash and, sorry, $491.4 million of availability under our new $500 million revolving credit facility. During the second quarter of ’22, we repurchased 764,988 shares for a total of $25 million under our Board authorized $100 million repurchase program.
Turning to capital spending, we invested a total of $59.9 million in capital additions, net of tenant allowances and opened four new stores during the quarter. Three, Dave & Buster’s in Brooklyn, New York, Modesto, California and Augusta, Georgia and one Main Event in Brownsville, Texas. We plan to open four additional new Dave & Buster’s branded stores and two Main Event branded stores in the back half of fiscal ’22. Looking ahead to fiscal ’23, we plan to open 15 to 17 new stores, including 11 to 12 Dave & Buster’s and four to five Main Event.
Finally, let me update you on our comparable store sales for the first five weeks of the third quarter. Consolidated comparable store sales have increased 22.1% compared to the same period in 2019 with increases at Dave & Buster’s branded stores at 17.6% and 42.3% at Main Event branded stores. Consolidated walk-in comparable store sales increased 24.7%, while Special Event comparable store sales declined 4.2% for the five-week period compared to 2019. At Dave & Buster’s branded stores, walk-in comparable store sales increased 20%, while Special Event comparable store sales declined 11.9% for the five-week period compared to 2019. At Main Event branded stores, walk-in comparable store sales increased 49 — sorry, 48.9%, while Special Event comparable store sales increased 9.3% for the five-week period compared to 2019.
I’ll conclude by saying that we remain optimistic about our business. We recognize the macroeconomic factors facing everyone today, still we remain focused on our continuous improvement philosophy, closely watching cost and capital spending to ensure we deliver the highest returns possible for our shareholders.
In summary, our team continues to execute on our initiatives to drive organic growth, improve profitability, integrate our operations and produce significant cash flow from the business. We are pleased with our progress and are well-positioned to deliver improved financial results for the remainder of fiscal year 2022 and beyond.
With that, I’ll turn it back to Chris.
Christopher Morris
Okay. Thank you, Mike. We are excited to have Dave & Buster’s and Main Event operating under one company umbrella. The combination of these industry leading brand brings together two exceptional business models, strong assets and talented teams. This strategic fit presents our company with exceptional growth opportunities which will benefit all stakeholders. There’s a lot happening at Dave & Buster’s and we are excited about the meaningful upside potential for this company and our stakeholders. We look forward to keeping you apprised of our strong momentum and progress against our long-term initiatives.
With that, we now open it up to Q&A.
Question-and-Answer Session
Operator
We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Jake Bartlett of Truist Securities. Please go ahead.
Jake Bartlett
Great. Thanks for taking the questions. And my first question and congratulations on it is the acceleration of same-store sales in the quarter-to-date, really strong acceleration there versus what you had in the second quarter. And so my question is, what do you think is driving that? Is there anything that you’re doing at either of the brands or both the brands that is driving that acceleration or is it something that you’re seeing with the consumer. Just help us understand maybe there was a mismatch of marketing dollars or specific promotions, just anything to help us understand really what is driving that strong acceleration here?
Christopher Morris
Yep, hey Jake, thank you very much for the question. This is Chris. Yeah, let’s — first thing I’ll tell you is, we’re incredibly enthusiastic about the momentum that we’re seeing in both businesses and really the strength of that momentum over a long period of time. So we were very optimistic about the direction of those brands. The acceleration of the comp store sales going from Q2 to Q3, there is really not one single thing that we can point to, but what I’ll tell you is we’re seeing that lift, that acceleration across the entire portfolio. So it’s not centered at one particular region of the country, there is not one particular market initiative, there is no mismatch that’s really driving that, it’s just simply an acceleration across both brands that we’re feeling at this point in time.
Jake Bartlett
Great, that’s helpful. And just the question of check and you talked about your intelligent pricing actions to defend margins here. But can you talk about how much of the quarter to-date maybe just to kind of frame the quarter-to-date results and how much is driven by check versus ’19. I assume the traffic is still negative on the and Dave & Buster’s side, but I think there is certainly some uncertainty about whether that check can be sustained at this higher level than ’19 and if you could maybe talk about your confidence that it can or can’t?
Michael Quartieri
Yeah, it’s Mike here. So given where we are, we really don’t have a very solid measure of traffic. So we kind of refrain from having any type of detailed discussions between traffic versus check, but the trends that we’ve seen in the past have continued, we are still seeing that higher-than-normal, I would say, it’s become a new normal, because it occurred just right after the reopening with the pandemic with the higher-than-normal power card purchases that we’ve seen. So other than that, business is just up across the board and I think we’re really pleased to see that, but we also want to be cautious about what we’re seeing going forward because it is two days after Labor Day and we’ve typically seen in street show that once we get past Labor Day, there is a bit of slowdown with kids being back at school. So at this point, we’re watching that very closely to make sure we monitor our cost in conjunction with what we’re seeing on the comp store sales at this point.
Jake Bartlett
Great. And then my last question is just on margins, obviously lot to factor in here with Main Event’s results being folded in. But in the past, sometimes you’ve given us a little bit of help in terms of what you expect your margins to be, whether it’s in the third quarter or maybe the back half of the year, higher, lower than previous years, any sort of guidance that you’re willing to provide just on what we should expect from maybe it’s store level margins or most importantly EBITDA would be helpful?
Michael Quartieri
Yeah, I think we’ll reiterate from an EBITDA margin perspective, we had talked previously about 200 basis point improvement over ’19. We obviously did not see that in this quarter, but we do expect that to return back in Q3 and beyond.
Jake Bartlett
Great, that’s helpful. Thank you very much.
Christopher Morris
Thank you, Jake.
Operator
The next question comes from Andy Barish of Jefferies. Please go ahead.
Andrew Barish
Hey, good afternoon guys. Just first from me on — drilling into Main Event and kind of the labor model, Dave & Buster’s made a lot of progress with some technology implementation during the pandemic, is there some things that you’re looking at and learning potentially in that regard, Chris, as we move forward here in an inflationary labor environment?
Christopher Morris
Yeah, great question Andy. The first thing I’ll tell you is not — we are spending a lot of time and we’re going to continue to spend a lot of time with our teams on just sharing best practices across both brands. So it’s not only labor but across all operating expenses and as well as just strategic opportunities. We really think that’s the big benefit of this merger is being able to take the best of both and leverage it in a way of meaningful growing both brands.
As it relates to labor and the technology that Dave & Buster’s implemented, Main Event has implemented a lot of the same tools, just the approach is slightly different but server tablets, every Main Event server now have a server tablet which then allows them to have cover more tables in the dining room, we’re able to get more labor efficiency through that. And so, we’re in the process of kind of digging in deep and just seeing what we can share. I would say that both brands have an opportunity to do a better job embracing guest facing technology to not only improve labor productivity but also doing a way to elevate the guest experience. And so our focus as a team is going to be on straddling both sides of [indiscernible]. And I firmly believe that as we do that, we’ll be able to really have a win-win-win, where we’re able to improve labor productivity, we’re able to elevate the guest experience, we’re able to improve tips across our servers which then, of course, leads to more sales growth.
Andrew Barish
Got you. And then just, I know there’s a lot of work underway on a variety of the sales driving sort of initiatives. It sounds like special events is certainly first and foremost going into the holidays and obviously football season is upon us, what would be one or two more of that come to the forefront from your early thinking in working with your team and the consultants, Chris?
A – Christopher Morris
Yep. So we’re — right now, we’re digging in deep to build our long-term strategic plan. And so, you heard me say that there are two workstreams that we’re following. One is, getting out spending a lot of time with our operators, hearing directly from our teams on where the opportunities are. So that’s more of a grounds-up approach. And then secondly, we’re doing a deep dive into the consumer environment, the competitive environment, understanding the core brand attributes which is more of a top-down approach. We’re about 30 days away from wrapping up that work and then what we will do is, we’ll converge those two workstreams and say okay team here is where we have the greatest opportunity to grow our business, not only now but over the next five years. So it’s going to be very thoughtful, very deliberate strategic approach anchored and core brand positioning that we will reinforce over a long period of time. And so, that is very important work that we — and that’s exactly what we will be presenting more than likely in the first quarter when we host our Analyst and Investor Day.
In the near-term, I think where we’ve been spending time with our operators is on really managing the peaks and so much of our business has done in such a short period of time, typically where you can get the greatest traction on sales growth is just improving the focus on those peak times and addressing bottlenecks and reliving pinch points, putting labor in the right areas, both to manage velocity as well as to manage average guest check. And so we’ve got a number of things that were immediately getting to with our operating teams that we will — what we’re doing is, we’re trying to address that near-term and then the plan is that our operator conference, which is in February, to really reinforce those opportunities and those behaviors at that operator conference so then we can really drive it home in that F23 year. So that’s where we’re focused right now.
Banquets, as you said, banquets is the near-term priority. That’s a big sales driver in the fourth quarter, we feel like that we’re going to have — there is already — we’re already seeing signs that we’re going to — there is a very strong chance that we’re going to be at or above pre-pandemic levels this banquets season. And so we’re spending time to capitalize on that opportunity. So we’ve got our entire sales team out completely focused on making this a banner year. Most of those booking start to occur in early October. And so, it’s really important that we get our teams dialed into that at this point in time so we can start signing up those bookings and then getting our operating teams staffed and ready to go to be able to execute those bookings in the fourth quarter.
Andrew Barish
Excellent. Thank you very much.
Christopher Morris
You bet.
Operator
The next question comes from Jeff Farmer of Gordon Haskett. Please go ahead.
Jeff Farmer
Thank you, appreciate it. Really just sort of a collection of follow-ups here. So you guys did touch on both wage rate and commodity inflation in the Q2, the question is, what are your expectations for inflation over the balance of the year? Do you think we’ve sort of moved through the peak level of inflation or is this going to get a little bit worse before it gets better?
Michael Quartieri
Well, I hope we hit the peak at this point, it seems that would be the case. However, when we look at Q1 versus Q2, the inflation impact was only a couple of additional percentage points. So it seems like it’s slowed to a point where maybe we’re at the peak. But one of the good things that we have going for us is, with the combination with Main Event and our combined purchasing power and what we’re seeing the opportunities are on the supply chain aspects of combining the purchase power to go back to suppliers, we feel that we’ll be able to offset some of that in the coming quarter, especially within Q3 and as we go into Q4.
Jeff Farmer
Okay. So I appreciate that, but are you able to provide the absolute level of inflation just for context relative to what we’ve been hearing from the rest of the segment in terms of the level of inflation you saw in the Q2?
Michael Quartieri
Yeah, within Q2 from a commodity perspective, our inflation rate was about 25% and 26% between the two brands. And just to give you a perspective versus Q2 of ’21 that was only about 8% at that point in time. From a labor perspective, we’re still seeing that inflationary percentage being around 22% to 23% on a blended basis between both brands.
Jeff Farmer
Okay. And then the last question, again something you sort of touched on, but as it related to your ability to really adjust pricing, your unique model, obviously, there’s a food and beverage side of it. But in terms of the amusement, can you just give us a little bit more color some of your efforts to use pricing as a way to offset some of that inflation?
Michael Quartieri
We really haven’t done anything additionally from the amusement side. As you know, back in October of last year, we increased the buy-in — low end of the buy-in at the Kiosk, which allowed us to get about 11% increase in power card purchase on the per transaction basis. We did take some on the gain, which is basically the cost of the number of coins in order to operate the game. We didn’t see much of any real impact on that, it’s really that just allowed people to utilize their card more quickly, but it didn’t really translate into any one coming in and or, how do you say, a meaningful number of people going for recharges at that point. What we’ve looked at from a food and beverage perspective, we did take price up 5% on the D&B side in mid-July and we’ve seen that hold throughout the period for the last few weeks of July and into August.
Jeff Farmer
Okay, appreciate it. Thank you.
Michael Quartieri
You got it.
Operator
The next question comes from Andrew Strelzik of BMO Capital Markets. Please go ahead.
Andrew Strelzik
Hey, good afternoon. Thanks for taking the questions. I wanted to start maybe if you could reflect on some of the initiatives that you guys have put in place over the last couple of quarters? Late night, you’ve talked about date night, but other things like Trivia, et cetera. I mean, is there any color or kind of data points you can put around that last quarter, you provided some late night I think plus 9% you said. Just curious any updates to any of those initiatives?
Christopher Morris
Yeah, from a late-night perspective, that’s the one that’s probably the most meaningful of all of those initiatives. As a percentage of overall sales in Q1, late night was about 8.8%, it’s improved to 9.7% of our overall sales. So it’s a little bit of an improvement, but we are pleased with that. The rest of the items such as like date night really hasn’t had a material impact on the operations because we’re just seeing overall traffic up in total. From another perspective, trying to think of anything else, we did launch on Open Table but that just gives us an opportunity to reach out to additional people. At this point in time, we found about 56,000 people have booked on Open Table that both directly through the app without typing in Dave & Buster’s, so we figure that that’s 56,000 more visitors that had come in that maybe not have considered Dave & Buster’s, so we are pleased to see that type of incremental growth in the visitation for us.
Andrew Strelzik
Got it. Okay, that’s helpful. And then I guess on the unit growth side 15% to 17% for ’23, and I believe the Main Event piece is a touch below what you had talked about at the — on the business update call, you have said something like 6% to 8% over the next 12 to 18 months. So I just — is that a function of timing and is the 15% to 17% the way that you’re thinking about kind of a medium-term run rate around unit openings beyond ’23?
Christopher Morris
Yeah, I would say the 15% to 17% seems to make sense of what we would have on a near-term basis on a year-over-year — as we look further out beyond ’23. The Main Event stores of four to five is really around timing as to when we want to execute on those versus Dave & Buster openings.
Andrew Strelzik
Okay. And then I guess just the last piece with what you talked about or talked about ESPN and maybe some of the other initiatives that you have going on, any directional commentary on the marketing spend expectations over the balance of the year would be helpful? Thank you.
Christopher Morris
We would anticipate the marketing spend to be fairly consistent with what we’ve had in the first half of the year. It’s really going to be centered around two campaigns, one of which being the football watch with Travis Kelce who happens to be [indiscernible] most favorite players since he is from Kansas City and the big [indiscernible] fan. But beyond that, it also we were looking at another promotion around the eat and play combo, which was very successful in Q1, we are looking to do that again in November, we would have an advertising campaign around that.
Andrew Strelzik
Got it, perfect. Thank you very much.
Christopher Morris
You’re welcome.
Operator
The next question comes from Chris O’Cull of Stifel. Please go ahead.
Chris O’Cull
Thanks. Good afternoon guys. Michael, I wanted to see if you could clarify your comments about the impact of seasonality. How do you — how did average weekly sales may be trend last year in the third quarter by period and do you expect to see a similar impact this year or were you indicating that you expected to be more pronounced? I’m just — I’m trying to understand how — what we should expect for the third?
Michael Quartieri
Well, I’ll kind of think of it this way. When you look at overall history from Q2 to Q3, Q3 has always been about 85% of Q2 sales. And so we went — and that’s pretty consistent not only with Dave & Buster’s but also with Main Event. So I wouldn’t expect that to materially change. As you look at the results, from Q2 going forward, we think that that percentage would probably stay the same on a go-forward basis.
Chris O’Cull
Okay. And then the consolidated store margin was lower than we would have expected this quarter and I know you talked — you called out inflation factors, but was there any one-time factors that may have been related to the transaction or integration that was not indicative of kind of the underlying cost pressure you’re seeing?
Michael Quartieri
Not really, most of anything that was related to the transaction would have been treated as an add-back to EBITDA, which is what I’ve talked about in the prepared remarks. But the one thing I will say is that, as you remember back in the first five weeks of Q2 we said we were running at about 12% up on a comp store basis and we finished the quarter at 9.6%. So the back seven weeks were slightly lower than the first five. At the same time, we had launched the great indoors, which was our summer ad campaign, which did performed reasonably well, but when you have the increased costs associated with that marketing spend and we made a conscious decision to lean in a little bit heavier on our labor at the store level to support those comp store sales we were seeing. These combined factors did have a negative impact on our margin this quarter. But since then we’ve taken the course corrective action on what we’ve seen from a comp perspective for Q3 to-date and we’ve seen that in our August results where we’re back on track to that 200-plus basis point improvement over 2019 that we’ve discussed previously.
Chris O’Cull
Great. Thanks guys.
Michael Quartieri
You’re welcome.
Christopher Morris
Thank you.
Operator
The next question comes from Brian Mullan of Deutsche Bank. Please go ahead.
Brian Mullan
Okay, thank you. Just a question on the plans to refresh/remodel the fleet of stores at the core Dave & Buster’s brand, could you just remind us what the plans are in terms of how many stores you want to touch over what timeframe? Anything on the cost per remodel there? And then just related, what are the characteristics of the store touching first, is it simply the older stores or are there other factors in terms of size or anything like that?
Christopher Morris
Yeah. So in general, we’re looking at about 90 stores to touch and it will probably take us the better part of about two to 2.5 years to do so because we want to be very cautious about how we do and go about these. From a cost perspective, depending on the level of the refresh, it could be anywhere between $1 million to $3 million in total. I think for this year, we’ve got 11 stores planned and each one of those 11 stores represents a different type of prototype of the construction of the stores that are out there that gives us the opportunity to walk the store and see what we agreed to what we like what we don’t like what we want to change. And so we’re able to do that before we then launch on that series of prototypes over the next couple of years. At the same time, as we’re doing additional work about really truly deep diving into our customer base and what they’re looking for, we can make adjustments into that refresh program and build that in over the course of the next couple of years.
Brian Mullan
Okay, thanks. And then a follow-up. Chris, just a question on the loyalty, your thoughts on what that means in the category, you gave some stats in the prepared remarks that D&B program is growing when we compare it to some — the size of it to some pure play restaurant concepts, it’s still pretty new pretty small. So how do you see that evolving and could just be an actual driver of transaction counts at some point for the core brand? And then anything at Main Event you were doing that would be helpful or informative of how you think about it at D&B?
Christopher Morris
Yeah, sure. So I absolutely believe that this could be a sales driver for us in many different ways. The fact that we just launched this in November and the loyalty program already represents 5% of our sales, we think that that is a very good sign. Building an effective loyalty program and the way we think about it as more of an engagement platform, building an effective engagement platform and entertainment-driven businesses is not — it has its own set of challenges just because we’re a low frequency occasion, our average frequency is less than two times a year. But to the extent that we’re able to stay engaged with our guests and maintain a dialog and gather insights into their particular behaviors, their pattern of behaviors just gives us an enormous opportunity to segment our messages and retarget them in different ways and ideally get them to stay more engaged with the brand to increase frequency over time and grow check and the process. So we see it as a way of growing both frequency and average guest check. So I think the early signs are very encouraging and we will be spending more and more time on that and see it as a big, big driver going forward.
On the Main Event side, Main Event is lagging D&B on this particular platform. And so I think this is an area where strategically we will be able to get Main Event where we want to be faster as a result of this merger integration. I also think that what — it’s still early, but I also believe that there could be power and having a loyalty platform to where you can retarget guest across both brands. So I think there is quite a bit of strategic upside here.
Brian Mullan
Thank you.
Operator
The next question comes from Nicole Miller of Piper Sandler. Please go ahead.
Nicole Miller
Thank you, good afternoon. Could you please translate the quarter-to-date comps on D&B and Main Event to a — versus the prior year comp?
Michael Quartieri
Yeah, that’s the — well, I’d say that information in the app — excuse me, is in the release itself.
Nicole Miller
Oh, it is. Okay, then I missed it, I’m still trying to get very — so the 18 and the 42, I think I wrote down are versus 2019, but versus 2021 numbers are in there?
Michael Quartieri
No, we only have it versus the ’19 numbers. The versus 2021 is a little, I’d say misleading because you had some unusual items that were taking place in that period of ’21 as we were still dealing with coming out of the corona virus recovery and then we were entering into the potential of omicron. So from our perspective, we’re only comparing everything publicly back to 2019 for now.
Nicole Miller
Can you translate it to average weekly sales, I guess it’s 85% of what 2Q was, but I guess is that the right zip code, is that’s the math we do, take the quarter-to-date, well, the models are built off of a prior year, so if we can’t do that then what we can do is take that 85% convention and that — I guess I’ll ask it this way, is that where average weekly sales are now, is that comp higher or [Multiple Speakers]
Michael Quartieri
It’s comp versus the 2019 period because the 2021 period is all over the board.
Nicole Miller
So are the average weekly sales in that go with that comp. You had just said that in 3Q seasonally adjusted right like sequentially would be about 85% of 2Q. So right now are the current trend higher or lower than that or are they right in line with that?
Michael Quartieri
They’re pretty much in line with that.
Nicole Miller
And then the numbers are one month of Main Event and I think there is a reconciliation, again, going through all the information of what the top and bottom line would have been for three months total. My second question is, would store level margin have been materially different if Main Event had been folded in for three months versus one month or can we go off of this one month and kind of be informed from there?
Michael Quartieri
I think you can go out to the one month and be informed from there. There is not a significant difference between the first two periods of the quarter for Main Event versus the third period that we picked up in our post-acquisition results.
Nicole Miller
And then just a big picture question. Can you talk about the Dave & Buster’s demographic profile today versus maybe what it was previously? And then, I know you’ve discussed, for example, Main Event seeming different maybe by age, for example, but could you go a little deeper on that demographic profile? And then how important is it for the — different or the same, what aspects are most important to be similar and what aspects are really important that they’re different?
Christopher Morris
Yeah, Nicole this is Chris. I think what I’m going to ask you to do is just hit pause on that question and attend our Analyst Investor Day in Q1 because I think that will be the point in time where we’re able to not only answer that question but put it in the context of where we see the big strategic opportunities for both brands as we move forward over a long period of time.
With all that said, both brands cast a very wide net. I think both brands will appeal to a very wide audience, we sell experiences in different ways, but both brands have a personality. And I think Main Event, the personality of Main Event is, it’s typically viewed as a place that’s a little more family-friendly and the personality of Dave & Buster’s is the place that’s viewed a little more friendly for young adult males, but Dave & Buster’s gets plenty of family occasions and Main Event gets plenty of adult occasions. So we see opportunities for sure. Both of these brands have been in the same markets for many years and both of them have thrived in those markets. And so we see a lot of growth opportunity for both of these brands. But when — and at the Investor Analyst Day, we’ll walk you through all the findings from our research.
Nicole Miller
That’s super fair. I understand that. Is it fair to say then — I mean, there is things that you can move forward with and then there’s things that’ll be informed by the work that you’re doing to inform a longer-term strategic plan. So maybe we’re just on the same page from that perspective, there are certain comps driver strategies I suppose and certainly development, right, but absent kind of that should we think about really the bigger fully formed strategy coming and then I guess it’s what six months and then taking course — taking place over the next one, three and five-year period something like that?
Christopher Morris
Well, what I’ll tell you is, our near-term focus is just executing the business plan on both brands and we’re having incredible success at both brands. We just reported a record-breaking quarter for Dave & Buster’s, when you look at the comp store sales performance for D&B and Main Event individually, there’s a lot of momentum in both of these brands. And so the business plan is working and the momentum is improved here and the quarter that we’re currently sitting in. And so, our immediate priority is just to continue to execute the plan. And so I think we’re in a perfect position to build upon the momentum that’s already been created in both of these businesses. But do in a way to where we’re more focused on maximizing shareholder value over a five-year period of time. And as I think through over a five-year period of time, how do we effectively grow both of these businesses to the point where they’re able to reach their potential in a way where we complement each other, that’s where we just need a little bit more time to fine tune our strategies.
Nicole Miller
Thank you very much.
Christopher Morris
You bet.
Operator
The next question comes from Brian Vaccaro of Raymond James. Please go ahead.
Brian Vaccaro
Hi, thanks and good evening. Just to clarify the quarter-to-date, I’m still a little confused. Mike, can you just tell us what AWS dollars are for each brand in the first five weeks to make sure we’re all on the same page?
Michael Quartieri
Yeah. Unfortunately, we don’t have that piece of data with us in front of us on this call, so what we would do is just point you guys back to the comp store sales increase. We also commented, if you read the 10-Q about what constitutes non-comp sales for both brands so that should be able to give you some help in getting to what you’re looking for.
Brian Vaccaro
Okay. The sales over the last few months and even into the quarter-to-date and I’m curious to what degree the customer mix continues to evolve perhaps normalize. I guess are you seeing more families come back and are you starting to see F&B attachment move more positively or is that holding more stable in the last few months. Any changes there to note?
Michael Quartieri
No, it really — it happens to be that it’s very stable across the board. As Chris mentioned before, it’s not really any one particular initiative that we have that’s driving the increase in sales. It is pretty much ratably across the board. We haven’t seen any real increase in attachment or check size. So from that perspective, it’s just an overall lift in the business.
Brian Vaccaro
Okay. And back to store margins, if I could. And sorry if I missed it, but what was marketing spend in your second quarter? And then could you also just drill down a little further in that other OpEx line, I know it’s not apples-to-apples, but was up nearly 300 basis points I guess sequentially. Just trying to understand that more clearly?
Michael Quartieri
Yeah, I would say marketing spend was probably around 15 plus million for total during the quarter. And as far as the other operating expense goes, probably the biggest components of that would include security because as you know as you get further into late night happy hours and alike, cities will or local authorities will require more security at that point. So we do have a number of off-duty police officers that are included in that number as well as some outside services as it relates to janitorial and cleaning aspects as we went. As we reopen from a pandemic perspective, we used outside services to handle that portion of the business because it was difficult in hiring individuals back at that point in time, but those are primarily the two key drivers within that that other line item.
Brian Vaccaro
Okay, thank you. And last one for me, you talked about raising the synergy target I think by $5 million. Just a little more color on the incremental savings that you’ve identified? Thank you.
Michael Quartieri
To-date that extra $5 million is really coming through on the cost of goods sold side, whether that’s in the food or the beverage aspect of it. That’s the piece that I think we’re most pleased with in regards to my comments earlier about the increase in inflation, we see the ability to having our two combined companies in that combined purchasing power being able to help offset that more or so than what we would have been able to achieve on our own.
Brian Vaccaro
All right, great. I’ll pass along. Thank you.
Michael Quartieri
Thank you.
Operator
The next question comes from Sharon Zackfia of William Blair. Please go ahead.
Sharon Zackfia
Hi, good afternoon. I was hoping we could get a read on what underlying G&A looks like. I know you had the Main Event acquisition and integration costs which you detailed in the release but I’m not sure how much of that was actually in the G&A bucket. So could you give us an idea of why core G&A for lack of a better way of phrasing it might have been in the second quarter and what a good run rate would be for the second half of the year?
Michael Quartieri
Yeah, if you look at our G&A cost overall, combined was roughly — we were about $36 million for the combined entity, of which the transaction cost which you could see in the EBITDA reconciliation would have been included in G&A as well as that impairment charge of $1.8 million was included in G&A. The other items called out like stock-based comp and preopening are separate line items. And so we would look at something like G&A be in somewhere around that $30 million mark is probably a fair number on a go-forward quarterly basis, which also I’d say for that $30 million that would also include the stock-based compensation amount.
Sharon Zackfia
Thanks for that. And then just a follow-up on some prior questions about unit level margins, obviously your comps are very, very good so far in the third quarter and it sounds like you’re not seeing a lot of price elasticity of giving on. So as we think about the unit level margins, I know the third quarter is just a seasonally low quarter but are you targeting getting back to a 30% plus level margin by the holiday quarter or would you rather knock prices high and go for volume and I guess I’m trying to figure out your philosophy around the pricing dynamic of the equation?
Michael Quartieri
Well, I’ll speak to, if you look at the 30% margin we experienced in Q1 is due to it being the seasonally high quarter that has a tremendous amount of flow through, especially when you get to that period around the spring break period. When you think about Q4, your regular seasonal low, it really takes place in that October, November timeframe. So there is — we won’t see that 30% type plus EBITDA margin in those periods. I think what you’ll see is something closer to more normalized run rate has been historically around the mid-20% for a EBITDA during those periods.
Sharon Zackfia
Sorry, I was talking about unit level store level not EBITDA?
Michael Quartieri
Typically, what we see between those two is probably about, call it maybe about a 5% mark between EBITDA at the consolidated level versus the store level. So you would assume that the store level would be closer to that 28% mark versus what you typically see if your overall margins is going to be around the 23%, 24% mark.
Sharon Zackfia
Okay. Last question for me was just appreciate the color on the 200 basis points EBITDA margin improvement relative to 2019 and expecting to get that back in the back half of this year. The company have been running ahead of that for quite a while, about the 200 basis points that you’re mentioning, is that just a function of really staffing not being up to where you wanted it to be, so you were, I guess “over earning” a bit during the last year?
Michael Quartieri
There is a little bit of that, but at the same time, as I said earlier, when you look at a year ago Q2, our commodity inflation was 8% and it’s now over 25%. So although the prior management team back right after the, call it the relaunch after the pandemic, had put out the 200 basis points. So it’s been a real effort on all of our part to continue to keep that 200 basis point improvement despite the fact that you have increasing commodity inflation as well as inflation within labor and that all triggers through the rest of the P&L whether that’s higher utility costs, higher outside services, overall just cost increase that we all have to face.
And so the company has done a fantastic job prior to the Main Event acquisition and we’re going to continue it afterwards of just digging into every line item and making sure that we’ve got the best possible cost structure we can in order to keep the margins of where we’re at without over increasing the pricing on this at the top level because we do realize that you can only take price up to a certain point before you start hurting the overall growth and health of the company.
Sharon Zackfia
Okay. Thank you.
Operator
This concludes our question-and-answer session. The conference has now also concluded. Thank you for attending today’s presentation and you may now disconnect.
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