Q2 2023 Dave & Buster's Entertainment Inc Earnings Call
Participants
Christopher D. Morris; CEO & Director; Dave & Buster's Entertainment, Inc.
Cory Hatton; VP of IR & Treasurer; Dave & Buster's Entertainment, Inc.
Michael A. Quartieri; Senior VP & CFO; Dave & Buster's Entertainment, Inc.
Andrew Strelzik; Senior Restaurant Analyst; BMO Capital Markets Equity Research
Brian Michael Vaccaro; MD; Raymond James & Associates, Inc., Research Division
Dennis Geiger; Director and Equity Research Analyst of Restaurants; UBS Investment Bank, Research Division
Jake Rowland Bartlett; VP; Truist Securities, Inc., Research Division
Jeffrey Daniel Farmer; MD & Senior Analyst of Restaurants; Gordon Haskett Research Advisors
Presentation
Operator
Good day, and welcome to the Dave & Buster's Second Quarter 2023 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.
I'd now like to turn the conference over to Cory Hatton, Vice President, Investor Relations and Treasurer. Please go ahead.
Cory Hatton
Thank you, operator, and welcome to everyone on the line. Leading today's call will be Chris Morris, our Chief Executive Officer; and Mike Quartieri, our Chief Financial Officer.
After our prepared remarks, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment Incorporated and is copyrighted.
Before we begin the discussion on our company's second quarter 2023 results, I'd like to call your attention to the fact that in our remarks and our responses to questions certain items may be discussed, which are not entirely based on historical fact. Any of these items should be considered forward-looking statements relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995.
All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on the various risk factors and uncertainties have been published in our filings with the SEC, which are available on our website.
In addition, our remarks today will include references to financial measures that are not defined under Generally Accepted Accounting Principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP measure contained in our earnings announcement released this afternoon.
With that, it is my pleasure to turn the call over to Chris.
Christopher D. Morris
All right. Thank you, Cory. Good afternoon, everyone. Thank you for joining our call today. We are pleased to report record results for the second quarter of fiscal 2023.
We generated revenue of $542 million, and adjusted EBITDA of $140 million resulting in an adjusted EBITDA margin of 25.9% for the quarter. In a few moments, Mike will walk you through the details of our financial performance.
As we take a step back and reflect on where we are, we remain as confident as ever in our ability to execute against the numerous and sizable growth initiatives that we laid out in our recent Investor Day presentation, and which we have already begun implementing.
During the quarter, we are pleased that we continue to open new stores at a highly attractive returns on invested capital, that we have diligently managed our cost structure, and continue to expand our adjusted EBITDA margins, and that our exceptional team has done a phenomenal job navigating our highly profitable and resilient business model through a dynamic period in our economy, and against strong top line comparisons versus 2022.
We are laser-focused on optimizing our business and growing revenue, adjusted EBITDA, and cash flow. We remain committed to our long-term target of adjusted EBITDA of $1 billion, and are making considerable progress towards that goal. I'd like to take a moment to update you on each of the 6 key organic growth initiatives.
First, marketing [optimization]. As a reminder, we strongly believe that there is a meaningful opportunity to grow traffic by making sure we get the right message to the right people at the right time. To that end, we have successfully completed our investment in the marketing technology infrastructure, and are now in the process of building the digital marketing engine that we expect will begin bearing fruit in the early part of fiscal 2024.
These tools will play a key role in developing a more personalized approach to marketing through improved targeting and guest engagement. In addition, our loyalty database is now 5.2 million users, up from 4.8 million users last quarter, as our mobile app experience keeps getting better.
Continuing to grow our loyalty database will be a key benefit for our top and bottom line as customers in our loyalty database visit approximately 50% more frequently, and spend approximately 15% more when they visit. As part of our broader effort to highlight our superior watch offering, and to use the sports calendar to drive visitation, This week we launched our fall football campaign along with an everyday $5 Bites menu.
We are also bringing back the successful All You Can Eat Wings on Mondays and Thursdays which our guests will particularly enjoy while cheering on their favorite teams.
Second, strategic game pricing. Playing games is at the core of our business model, and what we are and will always be most known for as a brand. As highlighted during our Investor Day, we believe there is a significant opportunity to implement a new comprehensive game pricing strategy to drive meaningful additional revenue, adjusted EBITDA and cash flow, while still maintaining our everyday value proposition with game prices still well below our peers.
While we require certain investments to fully implement all elements of our new strategy, we are currently unlocking new ways to optimize regional pricing that we expect to have a positive impact in the fourth quarter of 2023 during our key holiday period.
Third, improved food and beverage. As a reminder, significant opportunity exists to improve our attachment rate and overall revenue and profits generated by food and beverage business by simplifying our offerings, improving the quality of our offerings, investing in technology to accelerate speed of service, and optimizing our labor model.
We recently completed a test of the next phase of our new Dave & Buster's menu of the future and new hospitality-focused service model, which we are pleased to report was successful. During the test, these stores saw a low single-digit increase in sales, a 170 basis point improvement in food cost of sales, improved labor costs due to operational efficiency, improved speed of service and [OSAT] scores. We are on track to launch this phase of our new menu and F&B strategy system-wide by the end of September.
Fourth, remodels. We are in the process of modernizing and refreshing the look and feel of our D&B stores, improving the layout to increase traffic and overall productivity as well as implementing technology to support guest engagement, and introducing new entertainment offerings to drive traffic for a walk-in and special event business. I'm pleased to report the successful launch of our first of 12 test remodels, which went live in mid-August introducing our enhanced entertainment offerings.
Although it's only been 3 weeks, the new format is being well received by our guests, and performing ahead of expectations of a double-digit improvement in comparable store sales growth trends. There will be 8 more test remodels coming online in the balance of 2023 with the remaining 3 in 2024.
Once these tests are complete, we will provide more comprehensive financial observations of these test remodels, and how these initial results are sharpening our strategy for the planned rollout of the remodel program to the remaining D&B locations in 2024 and beyond. However, you can rest assured that we remain laser-focused on generating highly attractive returns on invested capital for the remodels.
Fifth, special Events. We continue to believe that there is a significant opportunity to improve execution in our special events business. While we have recovered back to pre-COVID levels on a combined brand basis, we are leveraging the strongest elements of the Main Event playbook to drive additional sales at Dave & Buster's, which is still meaningfully below pre-COVID levels.
We've completed the initial phase of adding sales managers to the stores, which has shown encouraging results. For example, while still in the early innings of the rollout of this initiative, at the stores where we've made the changes, we have seen more than double the advance group bookings for Q3 and Q4 on average versus the rest of the system.
While we expect significant near-term improvements in the special event business, we also expect the introduction of new entertainment offerings in connection with our store remodel program, to be a catalyst for our Special Event business.
Sixth, technology enablement. At the store level, we are focused on optimizing our current service model and updating our store IT infrastructure, which will lead to vastly improved data and analytics, better guest engagement and improved guest satisfaction.
Our technology leaders are hard at work in the quarter implementing a server tablet solution, selecting our enterprise POS of the future, installing new kiosks and working closely with our entertainment and operations team on our remodels. As with the remodels, we strongly believe these initiatives will lead to additional revenue, adjusted EBITDA, and we are laser-focused on generating an attractive return on the required investment in this area.
In aggregate, we are confident our organic growth initiatives will create significant shareholder value over the long-term, and our operational achievements in the quarter are indicative of the progress we are making towards our goal. As Mike will discuss in greater detail, our approach to running the business with sharpened cost controls enabled us to continue to expand our margins, which grew a 120 basis points versus 2022, and are now up 230 basis points in the second quarter versus 2019. We continue to find ways to permanently reduce our cost base that will be particularly powerful for cash flow generation, as the momentum continues to build as we execute against our long-term strategic plan.
In the quarter, we opened 2 new Dave & Buster's and 1 new Main Event. Our strong track record of opening new stores remains intact for fiscal 2023 as we continue to expect a total of 16 new stores this year across both brands. Our new store openings continue to perform exceptionally well and generate strong cash-on-cash returns.
We are very pleased with the progress being made throughout all areas of the business, and have high conviction that our strategic plan will deliver significant shareholder value. Despite the progress we've made towards our strategic plan and the demonstrated strength and resiliency of our business model, D&B remains extremely undervalued by the market.
To that end, our Board of Directors has approved an increase to our current share repurchase authorization, bringing our current authorization to $200 million. While we continue to prioritize high ROI investments in the business, and new stores we will also continue to opportunistically and aggressively buy back shares when our shares trade materially below our view at fair value.
So, now let me turn the call over to Mike for a review of our second quarter results. Mike?
Michael A. Quartieri
Thanks, Chris. We are pleased to report strong financial results for the second quarter. We generated second quarter revenue of $542.1 million and adjusted EBITDA of $140.3 million, an increase of 21.3% versus the prior year.
Net income in the second quarter totaled $25.9 million or $0.60 per diluted share. We reported $40.9 million of adjusted net income or $0.94 of adjusted earnings per diluted share, which includes an adjustment for the $11.2 million loss on debt refinancing in the quarter.
Reconciliations of these new non-GAAP measures can be found in today's press release. Pro forma comparable store sales decreased 6.3% versus 2022, as we continue to lap robust prior year periods from a top-line perspective. When we look back at a more normalized level of business, we are up 5.8% versus 2019 on a consolidated basis, led by the continued strength of our entertainment business.
Our special events business continues to recover with revenues up 15.6% on a year-over-year basis in the second quarter and remains close to flat in comparison to pro forma 2019 levels. Our second quarter adjusted EBITDA improved 230 basis points to 25.9% versus 2019.
As Chris mentioned, we continue to drive margin in this environment with a laser focus on our cost base, leaving no stone unturned across cost of goods sold, labor, store operating expenses and G&A. We are confident in the levers that we have to pull, and all 4 of these cost buckets that will result in the annualized run rate cost savings of $40 million to $60 million, as we laid out in our Investor Day presentation.
We generated a $103.8 million of operating cash flow during the second quarter, contributing to an ending cash balance of $82.6 million, for liquidity of over $572 million when combined with the $490 million available on our $500 million revolving credit facility, net of outstanding letters of credit. We ended the quarter with a total net leverage ratio of 2.1x.
Our strong balance sheet, low leverage and superior cash flow profile provides us with the ability to invest in the business, to drive profitable growth and continue to return capital to shareholders.
As previously disclosed in the second quarter, we repurchased 2.1 million shares at a total cost of $74.5 million, and after increasing our share repurchase authorization, we currently have $200 million of share repurchase authorization. Also in the quarter, we opportunistically re-priced our credit facility, reducing the spread on our Term Loan B, and any future revolver borrowings by 1.25%.
Turning to capital spending. We invested a total of $82.6 million in capital additions during the second quarter, opening 2 new Dave & Buster's stores and 1 new Main Event. We've already opened 1 new Dave & Buster's store during the third quarter of fiscal year 2023, and 1 new Main Event store as well. Also, as Chris mentioned, we are on track to open a total of 16 new stores and relocate 1 store across both brands during fiscal year '23.
To summarize, we are pleased with the progress we made in the quarter, strengthening our company's financial position with the favorable repricing of our Term Loan B, returning capital to shareholders via our share buyback program, and establishing a quantifiable roadmap to execute upon by unveiling our long-term strategic plan at our Investor Day in June.
There are numerous opportunities for us to pursue in the immediate near-term and long-term, and we remain focused on managing costs to unlock the maximum value of these 2 great brands and deliver the highest possible returns for our shareholders.
Now, operator, please open up the line for questions.
Question and Answer Session
Operator
(Operator Instructions) Today's first question comes from Jake Bartlett at Truist.
Jake Rowland Bartlett
My first is on the 3-year plan, the $1 billion in EBITDA that you're targeting by year 3. When you presented that it was a little -- I wasn't sure what the base year was. I think it was '22, but you kind of qualify that, but it depends on the macro environment. So my question is, are you on track with that 3-year plan? Has that been pushed out a little bit, or should we kind of think about year 3 as of 2025?
Christopher D. Morris
Yes. As we said during Investor Day, we are very enthusiastic and confident in our ability to deliver on that plan. We -- the 3-year timeline that we put out there will tell you, is, that's not a fixed timeline, but there is clearly a path towards a $1 billion in EBITDA over the medium-term.
We haven't shifted at all our thinking on delivering on the outcome of that plan, but we really want to stay away from putting like a fixed timeline on it. It was merely, just simply saying -- look, there's incredible opportunity in this business. There is a clear line of sight on how we get to $1 billion. It feels like that -- we feel confident that we can deliver on that in the medium-term.
In term -- that might shift 1 month or 2 or 6 months or 2, or even 1 year or 2 depending on things that are happening in the external environment. But make no mistake, the opportunity is there. In terms of the progress that we've made, I will tell you that we are right in line with our plan. We are very encouraged with the results that we are seeing with respect to the items that we've implemented thus far.
Investor Day was June 13. So, we are only just a few months into this. But from what we are seeing right now, we are even more confident than we were 3 months ago in where we are going and where our [team's] -- what our team is focused on and our ability to drive meaningful value over the medium-term.
Jake Rowland Bartlett
My next question is just on the trajectory of the business. Obviously, the comps versus '19 have been decelerating pretty consistently now for the last 4 quarters. What is your confidence that, that's going to stabilize? The excess demand essentially that was kind of -- that occurred post-COVID has worked its way out, and that you should see at least a reacceleration? I guess within that question, are you seeing that -- yes, is there any -- as you look at the trends within the quarter, the quarter-to-date, any indication that you're seeing that stabilization, even outside of some of the initiatives that seen really promising coming up in the next quarter or 2?
Christopher D. Morris
Yes, let me -- I'll start and then I'll turn it over to Mike to just to add some additional color commentary. What you're going to consistently hear from us, this is a team that's very much focused on delivering on that long-term plan, and that's where our focus is. We are excited about what we are doing. As I said, there is a clear line of sight and our ability to deliver on that plan over the long run.
And so where -- we don't really get caught up in month-to-month trends. What I'll tell you is, [yes], look, the comparisons to the prior year are challenging. Last year at this point in time we benefited from the post-COVID surge along with all of our peers, and as we're lapping that period of time on a year-over-year basis, comps are challenging. We are pleased that compared to 2019 we are still up 6% over that comparison.
And we are particularly pleased and proud of the work that our team has done to navigate through this environment, and still deliver on the bottom line. And most importantly, we remain as confident as ever in the initiatives that we outlined during Investor Day, and the exciting opportunity in front of us to drive meaningful value.
Michael A. Quartieri
Yes, I think to add on to that, when you look back 1 year ago we comped plus 17.5% in Q3. And so that is a huge number to overlap. And so, when you go back versus '22, yes, it's a tough comp. We look back at '19, we see still the growth in the business that we wanted to see, which is that 2% type growth on an annual basis going forward, which is a more normalized environment that you would expect to see in businesses like ours.
What has us at this point, we can't control the macroeconomic factors that are driving traffic into those effect. What we do control is what happens in the 4 walls of our business and that's the type of attitude the -- as I call it bringing it every day to control those 4 wall EBITDA margins and that's the value that you're seeing in that EBITDA margin today, even in this type of an environment where we can expand on those EBITDA margins.
The actions that we are taking today around that will -- are permanent in nature, and will be able to benefit us even further as traffic and economy returns back to more normalized levels.
Operator
Our next question today comes from Jeff Farmer at Gordon Haskett.
Jeffrey Daniel Farmer
Just wanted to start with following up on Jake's question. So is there anything you guys can share as it relates to how the Q2 same-store sales sort of finished relative to your internal expectations? Anything that caught you guys off guard either positively or negatively?
Christopher D. Morris
No, I think as you look at the back end of Q2, and what we're seeing today, it's a relatively consistent level of comp store sales. Unfortunately, it's a decline, but those levels are pretty consistent across the board. We evaluate each of the different demographics within our business, I'd say demographics of our consumer, but also from a geographic perspective.
And at this point, we are not seeing any one particular group that's underperforming the rest of the demographic area as well as the geography of those types of results.
Jeffrey Daniel Farmer
And then, it looks like you guys saw roughly 250 basis points of food and beverage cost favorability year-over-year. The question is -- so lot of things can impact that, so either cost initiatives, menu pricing, commodity inflation. Can you help us understand what drove that level of 250 basis points, which was more than doubled what you saw in the Q1? And then as we move forward, how should we be thinking about that? So just understanding the drivers of that cost favorability? And how we should be thinking about it moving over the next 2 quarters?
Michael A. Quartieri
Yes. So when you look at the improvement in the cost of goods sold line for food and beverage, and there's couple of aspects. One, we haven't done anything from a pricing perspective between Q1 and Q2. So pricing there is consistent. The benefit comes from continued work from a synergy perspective as we've gone through kind of the second round of contracts, where contracts that were fixed in nature needed to run their term.
And then, we were able to then consolidate the procurement volumes, and go after that from a cost save perspective. As Chris spoke to during his prepared remarks, we're testing new menu items that yield a cost benefit to us from a cost of goods sales perspective. And then lastly, as we always look for more improvement from prep time and things of that effect.
The ability from a commodity perspective, we are seeing relative consistency commodities quarter-to-quarter. So, we're benefiting on a commodity basis relatively as a straightforward from Q1 at about 3% improvement on a year-over-year basis.
Operator
And our next question today comes from Brian Vaccaro with Raymond James.
Brian Michael Vaccaro
Just wanted to ask about the comps again, and just sort of the cadence you saw through the quarter. Obviously comps down in the [6s] now. And I just wanted to get your perspective on what you think is driving that sequential softness and just sort of the health of your consumer? I think you mentioned it's not concentrated in any area, but is there anything you're seeing day part or weekday versus weekend or F&B versus amusements? Just any incremental context on what you think is driving those -- that sequential softening?
Christopher D. Morris
Yes, Brian. I'll take that, and then let Q wrap it up. First thing I'll say is -- I'll repeat what I said to Jake earlier is, last year -- part of what we are dealing with is just a tough comparison to the prior year, just with the post-COVID surge, and our performance last year benefited from that just as our peer group did. And so, there is a bit of a tough comparison.
And as I said, when we compare ourselves to 2019, first, we are pleased with the growth from 2019. Secondly, there was no -- there was really no material trend in the business throughout the quarter. It was fairly consistent. We've -- As we always do, we've analyzed the heck out of our business, slicing and dicing it every single way. What I'll tell you is there was nothing meaningful that came out of that.
We think that it was just overall -- relative to 2002 there was just a decline. So, there's not one thing that we could really point to that would suggest that it's related to a shift in consumer behavior in terms of how they're trading at Dave & Buster's or anything along those lines.
Michael A. Quartieri
Yes, I think one thing to add on that, what we are seeing is for the customers that are coming in, they're spending at consistent levels of what we historically have seen in that post-COVID environment. So, when you look at our mix between revenue -- of revenues between amusement and food and beverage, we are still kind of holding at that 1/3, 2/3s with the 2/3s being on the amusement side.
Brian Michael Vaccaro
And just on the initiatives to optimize your pricing on the games. Could you elaborate on the changes that you're making that will have an impact beginning in the fourth quarter? Just some of the specifics there? And any ballpark of how much of a pricing benefit you expect that to yield starting in the fourth quarter?
And then also, I think you were thinking about -- and maybe testing raising the buy-in -- the minimum buy-in level, may be from $15 to $20 if memory serves. Have you made a decision on that front?
Michael A. Quartieri
Yes. So I'll give you the 2 main takeaways. One, towards the end of the quarter -- so there was really no benefit in Q2. We did adjust the rate card, which is the buy-in at the kiosk. When you look at our pricing before, the low-end entry point was $15 and then it went from $15 to $25 to $35 to $45. We adjusted those rate cards to actually start with $20. So -- and then it goes from $20 to $30 to $40 to $50.
The dollar value per chip that the customer receives is consistent. So, it really wasn't much of a call at a price change as it was a change in just the buy-in amount at the minimum level, and then it went up through there.
The other aspect of what we are looking to accomplish is, as we've talked before, one of the strategic unlocks in pricing is the ability to alter pricing between geographic areas.
So, no different than when you look at food and beverage costs. In major metropolitan areas usually, it costs more from a price point than in more regional markets or smaller towns. Right now our limitation is that all pricing for all games is consistent across the entire system. We're now able to unlock that, and be able to put regional pricing in place, which will start going into test in the next couple of weeks.
One of the key things we want to do, though, in doing such is make sure that we maintain the value of our product offering in relation to our peers. So from that respect, we haven't communicated, nor would we, what we think that estimated growth would be in Q4, but we would expect there to be something there.
Brian Michael Vaccaro
And then just the last one from me if I could. I appreciate the update you provided on certain initiatives that you laid out at the Analyst Day. But -- I know it's early days, but can you elaborate on the customer response you've seen in the Friendswood remodel? Any specifics on how the social base are performing, or other specific changes that you made that are driving the increase most meaningfully?
Christopher D. Morris
Yes, happy to do so. I mean, I -- it's -- we're very pleased with the guest response in the community on all aspects of the remodel, to be perfectly frank. As we said in our prepared remarks, it's only 3 weeks. It's only 1 store. And so, we are trying to be guarded in our enthusiasm. But over the last 3 weeks, [Friendswood], that particular unit has outperformed our expectations.
So, we are feeling very good about what we'll be able to do with remodels, and we feel very good about expanding our entertainment offering, and doing it in a way that we think is at the heart and center of what a D&B guest is looking for. So, so far so good.
Operator
And our next question today comes from Andrew Strelzik with BMO.
Andrew Strelzik
My first one -- appreciating certainly that you can affect the macro environment. I guess it's a question how you're thinking about balancing the multi-year strategic plan and implementation of that versus like flexibility on the nearer in opportunities? And so, I guess it sounds like there's more value on the F&B side. Some of the other changes that you've talked about, some more marketing around football. Do you think that, that addresses kind of what…?
Christopher D. Morris
Andrew, we lost you. Andrew, we're having a connection problem. Yes, we lost you right after you said -- do you mind just starting from the beginning?
Andrew Strelzik
Yes. I guess the question is really is, how are you -- like, what is the flexibility of the plan in the near term as you kind of navigate what isn't a macro that you cannot control? Do you think about the pricing opportunities differently? Are there any other programs that you can implement that you're thinking about to be adaptable to the current macro?
Christopher D. Morris
Yes. Well, look, the short answer is we are very mindful of how we navigate the business during this period of time and still deliver on our long-term goals. A big part of that is how we are managing the cost structure. And as I said 1 minute ago, I'm very proud of all the work that our team is doing to manage the middle of the P&L, and when we can navigate through this type of environment and still deliver on the bottom line.
That provides just a tremendous amount of flexibility, and gives us confidence to continue to invest in the right areas of the business. With all that said though, we are moving forward with eyes wide open, and being very mindful of not getting too far ahead of ourselves on investment spending, and ensuring that we are balancing all sides of the business.
I don't see -- at this point in time, we are not seeing anything that would suggest that we need to rethink our strategic priorities. We're still just as committed as we were at June 13, on the areas that we outlined with you. Where we see some momentum in the business is on the food and beverage changes that we're making. And so, this space that we tested that we're going to be rolling out in September.
We feel great about the results that we're driving. And that's a very thoughtful approach to food and beverage. It's not just recipes, it's how the menu -- how we deliver on that menu at the store level and drive a great guest experience. That's something that we're going to continue to push forward on, the enhanced service model to be able to promote that phenomenal food and beverage offering and to drive attached.
That's something that we continue to be focused on. Special Events is an area. So all the areas that we outlined at this point in time, we're still moving forward with the same amount of enthusiasm and the same commitment. But obviously, we're doing it in a very careful way just to make sure we don't get ahead of ourselves.
Andrew Strelzik
I just wanted to quickly -- there is a second question, ask about some of the new stores that you guys have opened and kind of, you sounded pretty excited about the return profile and the performance of the new stores in this environment. I'm just curious kind of any other color that you can share how those are tracking versus other prior classes et cetera? That would be great.
Christopher D. Morris
I'll just say, what we said is, I mean we were consistently getting phenomenal returns. This is -- we've got a great business with great margins and a great business model that delivers very strong cash-on-cash returns. And we're pleased with the economics of our most recent new store openings. And so, we're going to continue to make new unit openings a priority in our capital allocation.
Operator
(Operator Instructions) Our next question comes from Dennis Geiger at UBS.
Dennis Geiger
I'm wondering if you could talk a little bit more about the menu enhancements or the menu of the future, which sounds particularly [interesting]? Could you share sort of approximately how many stores were in that test? Anything else sort of on customer feedback scores to share, which I guess sounds good? And then just as a quick reminder that's rolling out across the system by the end of this month. Do I -- Did I catch that correctly?
Christopher D. Morris
Yes, you caught that correctly. So, let me step back. So, in Investor Day, we said, improving food and beverage was one of our 6 growth initiatives, and specifically grown F&B attached. Our -- That's a multi-phased -- our approach to delivering on those outcomes is a multi-phased approach.
What we tested -- and we tested it in 10 locations, was the second phase of this multi-phased approach, but through this phase it's been highly impactful and done by design. What we intended to do is first, let's remove unnecessary operating complexity, because we want it -- for us to deliver a consistently high-quality product. We want to set our operators up for success, and we want to invest a labor in the right areas. It's going to lead to quality and enhanced guest experience.
So, we intentionally removed operating complexity. We -- everything that we're doing is anchored in deep research, and so, we spent a lot of time understanding how our guests view our F&B offering and where the gaps are. And through that research we felt like that there were some areas on the menu that either weren't necessary. Our guests -- there was no loyalty to those items based on our research, or we were under delivering on the execution. And so, we redesigned the menu with -- in an effort to close that gap. That was the second piece that we did.
Third is, there were certain areas in our execution that we felt like that were driving up food cost without really adding value to satisfaction. And so, part of what we aim to do is to remove -- reduce that added cost to our food cost when it wasn't necessary.
And so, there were some steps that we're doing that added unnecessary ingredient costs that really didn't make a difference and so, we changed those. So all of those are in our Phase 2, and as you can see in the results in that 10-unit test we're very pleased. We kind of hit on all marks, and the next phase will be launched -- So, to roll this out across the system, it takes time and so, we're being thoughtful about it. We rollout Phase 2 the end of September, and then Phase 3 will be in February next year.
And at that point in time, Phase 3 will include additional innovation. We'll really start to push the envelope on new products. We'll be very intentional about in-store marketing, and at the same time we'll be rolling out an enhanced service model, giving our operators the tools that they need to really deliver in a big way. So, it's fairly -- it's thoughtful and strategic and multi-step. So, we are pleased.
Dennis Geiger
Just one more. Wanted to -- just like to ask a little more on promotions and marketing campaigns going forward over the coming quarters. I know you highlighted some as it relates to -- for the football season, which sound compelling. But can you talk maybe a little more about -- at a high level at least about perhaps what the next 12 months may look like in thinking about promotions, and campaigns relative to historical -- maybe you don't want to say too much for competitive reasons, but just thinking about where food costs are et cetera? And maybe what that allows you to do from a promotional standpoint? Just curious if anything additional to share there on the go forward?
Christopher D. Morris
Nothing to share at this point in time. We're still in the process of finalizing our marketing calendar for next year. And so, our team is very focused on building up an exciting marketing calendar. And so, more to come on that, but nothing to share at this point in time. The calendar -- the fall football campaign that we just launched this week, we're pretty excited about that.
One, it just gives us more opportunity to highlight the great sports watch offer that we have in the marketplace. Number two is, from our research we know that the consumer is gravitating to value-driven messages. And so, based on our concept testing, we feel like the $5 Bite message is a message that's going to resonate very well. And then the rolling out All You Can Eat Wings, we went back and looked at the last time we did this.
And we talked to our operators, and we're pretty encouraged about what we are doing on All You Can Eat Wings, this go around, and it appeared to be a nice traffic mover in the past, and what we've done is we've retooled that to be even more effective. So again, just working closely with our operators to make sure we're setting them up for success. So, we like the message. We like the marketing plan for the remainder of this year, and we're pretty optimistic.
Operator
And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to the management team for any final remarks.
Christopher D. Morris
Okay. All right. Thank you very much, operator. In closing, we'd like to commend our team for the exceptional results they continue to produce across our growing portfolio of Dave & Buster's, our Main Event stores. Thank you all for joining. We look forward to speaking with you again next quarter, and keeping you [apprised] of our continued progress on our strategic initiatives. Have a great day.
Operator
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
