Categories Earnings Call Transcripts, Leisure & Entertainment

Dave & Buster’s Entertainment, Inc. (PLAY) Q1 2022 Earnings Call Transcript

PLAY Earnings Call - Final Transcript

Dave & Buster’s Entertainment, Inc. (NASDAQ: PLAY) Q1 2022 earnings call dated Jun. 07, 2022

Corporate Participants:

Michael Quartieri — Chief Financial Officer

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Margo L. Manning — Senior Vice President and Chief Operating Officer

Analysts:

Jake Bartlett — Truist Securities — Analyst

Nicole Miller — Piper Sandler — Analyst

Andrew Barish — Jefferies — Analyst

Patrick — Stifel — Analyst

Jeff Farmer — Gordon Haskett — Analyst

Andrew Strelzik — BMO Capital Markets — Analyst

Brian Vaccaro — Raymond James — Analyst

Presentation:

Operator

Good morning, and welcome to Dave & Buster’s First Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Michael Quartieri, CFO. Please go ahead.

Michael Quartieri — Chief Financial Officer

Thank you, operator, and thank you all for joining us today. Joining me on today’s call are Kevin Sheehan, Interim Chief Executive Officer; and Margo Manning, Chief Operating Officer. After our prepared comments, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster’s Entertainment Incorporated and is copyrighted.

Before we begin our discussion on the company’s results, I’d like to call to your attention to the fact that is in our remarks, 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 results contained in our earnings announcement released this morning, which is also available on our website.

Now I’d like to turn the call over to Kevin.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Thanks, Mike. Good morning, everyone. We are very pleased to report yet another quarter of outstanding financial results. We set records for revenue, net income and adjusted EBITDA in the first quarter, reflecting both progress towards returning to a normalized operating environment and our success in driving top line growth. I’m so proud of our teams as they have enthusiastically welcomed back guests to our stores. We’re excited about the trajectory of the business and in particular, the next few months as we begin our summer of games rollout and other traffic driving initiatives that we are confident will drive even more visitation to our stores.

As demonstrated by or first quarter results, our teams continue to execute on our initiatives to drive organic growth, improve profitability and produce significant cash flow for the business. We have significant upside potential and with our continued focus on innovation, growth and value creation, we can deliver. As you can tell, I’m very excited about the future of this company. We are optimistic about the state of the business and look forward to sharing our ongoing progress in coming quarters.

At this time, Mike is going to cover the first quarter results. After that, our COO, Margo Manning, will update you on the operations, then I will return with some final comments. Mike?

Michael Quartieri — Chief Financial Officer

Thanks, Kevin. Our record first quarter results demonstrated our ability to drive revenue, profitability and strong cash flow despite continued headwinds in the economy. We continue to benefit from a higher mix of amusement and a leaner operating model. While we are still experiencing pressures from wage and commodity inflation, our margins continue to improve as we have offset inflationary costs with a more efficient labor model, cost savings and efficiencies and thoughtful pricing actions.

In the first quarter, comp store sales increased 10.9% compared to the same period in 2019. Our walk-in sales continue to post strong comps, up 14.7%, while our special events business continue to lag, down 34.6% compared with 2019. However, this showed sequential improvement from the fourth quarter and we believe this part of our business is recovering. When looking at our overall comp store sales by month in the quarter, February was flat due to the Omnicom variant, March was up 12.5% as a substantial portion of the COVID restrictions were lifted in advance of the spring break season, and April was up 21.5%, which it was helped by the return of our eat and play combo promotion. Our uplift in comp store sales has continued during the first five weeks of Q2, as overall comps are up 12.2%.

Regarding sales mix, amusements and other had a positive 23.8% comp and was 66% of our overall mix compared with 59% of our mix in 2019. This was mainly due to minimal discounting and a continued shift to higher denomination power cards. F&B had a negative 8.1% comp compared with 2019, a substantial portion of which was due to the softness in the special events business which we believe is starting to rebound.

Adjusted EBITDA for the quarter was a record $143.2 million or 45.8% higher than the same period in 2019. This reflects a 31.8% adjusted EBITDA margin, which is 480 basis points higher compared to the same period in 2019. The improved performance was primarily driven by the higher amusement mix and leverage on labor due to a more efficient model. Net income of $67 million increased $24.5 million in the quarter compared with 2019, resulting in EPS of $1.35 per diluted share. These results generated solid positive operating cash flow in the quarter. We ended the quarter with $139.1 million in cash, and approximately $492.5 million of liquidity under our $500 million revolving credit, net of any outstanding letters of credit. As a result of our continued improvement in our operating results over the trailing 12 months, our net debt leverage ratio has decreased to 0.7 times.

Turning to capital spending, we invested a total of $42.2 million in capital additions, net of tenant allowances and opened one new store in Sioux Falls, South Dakota, this quarter. We opened our Brooklyn Atlantic center, which is directly across from the Barclays Center, and Modesto, California locations in May, and plan to open our Augusta, Georgia location later this month, making three new store openings in in Q2. In fiscal year 2022, we plan to open a total of eight new stores.

As you can tell, we are very pleased with our first quarter results and the strong momentum we are seeing. Through the first five weeks of the second quarter, comp store sales increased 12.2% compared to the same period in 2019. Walk-in comp stores increased 17.8%, while special event comp store sales declined 27.9% for that five-week period. We remain bullish on our business based on the traffic levels we are seeing on a weekly basis. The upcoming summer season and the rollout of our summer games program. With that, we do remain mindful of the macroeconomic factors facing everyone today. We were diligent in our continuous improvement philosophy, watching costs and capital spending closely to ensure we deliver the highest possible returns for our shareholders.

In summary, our team continues to execute on our initiatives to drive organic growth, improved profitability, and produce significant cash flow from the business. We are pleased with our progress and are well positioned to deliver improved financial results in fiscal year 2022.

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

Margo L. Manning — Senior Vice President and Chief Operating Officer

Thank you, Mike, and good morning, everyone. We continue with our commitment to simplify store operations, improving our guest experience and enhancing our food, beverage and entertainment offering to drive sales and profitability. In Q1, we brought back one of our most successful promotion, our eat and play combo, ran as a limited time offer for the length of April to capitalize on pent-up demand from our more value-oriented guests. We saw sequential comp store sales improvement in both food and beverage throughout Q1, with the comp food item count turning positive during the eat and play combo campaign window.

In late May, we completed the brand wide rollout of reservation capabilities to make it even easier for our guests to dine with us. Guests can now reserve a table in our dining rooms directly through the D&B website or via OpenTable. Our stabilized our stabilized staffing levels have put us in a better position to serve our guests. We are already seeing the benefit of our now fully implemented service model that allows our guests to choose their service experience. The data pull from our guest satisfaction tool showed our overall guest satisfaction and net promoter score hit a new high watermark in May.

Our new beverage menu launched in January was designed to expand both reach and appeal. We’re proud to share this new beverage program, was recently recognized at the Annual VIBE Conference as the best overall program for multi-unit operators. In Q1, we started our efforts to revitalize our Late Night segments through a combination of marketing and programing effort. Our Late Night Happy Hour initiative includes reduced size as popular app at $5 late night bites and an enhanced late night vibe with live streaming DJ set and exclusive visuals taking over our screens and our in-store airways. Q1 walk in comp sales during the Late Night segment were at positive 9% versus 2019, and were significantly improved over the prior quarter. With the Late Night Happy Hour programming fully established, our marketing team is now poised to promote it this summer through digital channels to build awareness.

Our summer campaign launching in June positions Dave investors as the great indoors and includes activations across the marketing funnel to drive trial of our 10 new arcade games, which are debuting exclusively at D&B, and our seven new food and beverage features. Also part of our summer of game lineup, we have introduced two new virtual reality titles based on Transformers and Top Gun Maverick, both of which are proprietary to D&B. The transformer virtual reality game has multiple branching paths and different endings, ensuring each player has a unique experience that leaves them wanting to play again and again. Our top 10 virtual reality game ties in with the new blockbuster films and lets our guests take command of the weapons of an advanced fighter jet as they ride along with the best of the best.

Enrollment in the D&B royalty program continues to grow with Q1 being 8,000 additional downloads or a 23.9% increase in downloads. This increase in downloads combined with reactivation effort led to a 33.2% increase in loyalty profiles, giving us a total of 3.65 million user profiles. Of those 3.65 million, 1.9 million are active in the last six months. Development of a new websites began late in Q1 and will launch late in Q3, bringing new special event capabilities, e-commerce, programing content and a platform that we can build upon with regular releases at new capabilities. Let me wrap up by thanking the D&B team. None of these results will be possible without your commitment to the guest experience and to bring the fans to life in our stores.

Now I’ll turn the call back over to Kevin.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

We are pleased with the record results we delivered in the first quarter. We are seeing guests returning to our stores, our special events business is recurring, and I’m confident that — confident in another few months we will be in a much better place at the core business returns and we increase our efforts on corporate events and a logical extension. We’ve been able to offset inflationary pressures from labor and supply chain with more efficient labor model enabled by technology, lean process improvements, proactive menu price adjustments and more effective marketing investments. As a result, we have improved margins even though we have experienced some headwinds in our business.

We are extremely excited to add Main Event to the Dave & Buster’s team. Their strong management team and strategic fit with our company provide for even more growth opportunities for both brands, which will benefit all stakeholders. We expect to close the transaction in a couple of weeks and we will schedule an investor update shortly thereafter. At that time, we will detail the compelling merits of the transaction, our integration efforts and all of the value creation initiatives already being teed up.

As I had said before, we have an exceptional business model, strong assets and a talented team. We are optimizing the performance at our existing stores and are achieving best-in-class average unit volume, store level margins and solid returns on our new stores. We are broadening our entertainment offering to include more immersive sports viewing experience, including improvements to the watch environment and looking forward to the addition of fantasy sports and the sports betting option in markets as permitted. We are optimistic about the summer games which rollout and will be supported by significant marketing campaign.

We are progressing with our refresh remodel program to give our existing stores a fresh look and we are also evaluating relocation opportunities in some of our legacy markets where we can open up new, more efficient stores and capitalize on higher potential return locations, and we continue to refine our store layouts and sizes to optimize their market potential. Finally, our international efforts are starting to develop, and we will begin to detail our efforts in coming quarters. There is a lot happening at Dave & Buster’s, and we are extremely excited about the meaningful upside potential for this company and our stakeholders.

Now, before we open it up to questions, I have some final comments. It’s been my pleasure to serve in this role for the past nine months. Working together with this team, we have accomplished much, reopening all of our stores following the COVID shutdowns, broadening our entertainment offering to include more immersive sports viewing experience, connecting our refresh remodel program that will give our existing stores a fresh look, a new beverage menu, a nationwide partnership with both UFC and WWE to bring all of their pay per view events to our locations, a new D&B rewards program and a fantastic marriage with Main Event.

Today, we are on a path of strong organic growth, improved margins and a strong balance sheet as reflected in our 0.7 net debt leverage ratio. All of these accomplishments are the result of the hard work and dedication of our team, and I look forward to continuing my role as Chairman of the Board. We have an outstanding organization and it will get even better following the acquisition of Main Event. I’m looking forward to having Chris Morris join as the new CEO of Dave & Buster’s. He s an experienced leader and is excited to engage with our shareholders in the months ahead. Under Chris’ leadership, I anticipate that our positive momentum will continue as we continue to make progress towards realizing our ultimate potential, and now we can take your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Jake Bartlett of Truist Securities. Please go ahead.

Jake Bartlett — Truist Securities — Analyst

Great, thanks for taking the question. First, Kevin, I’m hoping you can — you can build on your last comments there, just in your experience at the helm of the company, you’re looking at the company from a different perspective than your position on the Board. How is that perspective changed as you’ve dug in to the nitty-gritty? And what do you think the greatest opportunities are going forward?

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Thanks, Jake, I appreciate that question actually. And I think as those of you that remember the very first call that I was on, I looked at this as a great opportunity, not — Steve and Brian we’re great CEOs. But sometimes when you get a new person coming in with a fresh perspective, It can change everything. And I had always talk to you guys about taking a clean sheet of paper and trying to determine the art of the possible, not only on running the business, but on each and every opportunity and you heard me go on early on about. Hey, what do we do with each day of week. What do we do with the hours of the day. How do we spike the demand across the board. And this enormous opportunities, and we’ve taken advantage of quite a few I would say. And if you look at it, we probably in the latter part of the second quarter of the football game where we’re going to get an opportunity with Chris coming in to take a half-time huddle and re-spirit everybody and refocus and drive on all the initiatives that are still there.

But if you think about, we’ve got initiatives on that — we haven’t announced yet on Monday. We’ve got late night that Margo talked about, which is a huge opportunity to get back to where we were. But not only that, to make it a more interesting place to come. We’ve got opportunities on what we’re calling a date night. We think there is a big opportunity there. What — is there any more comfortable place to come on a date with someone. And if you get bored, be able to kind of go play games and recover and then come back happier, you play a little bit and be more comfortable in your date evenings. But is a loaded house. And as you know, expanding into the international, which we think is a big opportunity, refreshing the stores, enormous opportunity to take each and every one of our stores and say how do we take this and put all of the — the new branding that we have in our new stores so that we can emulate those into these stores. So it’s just an enormous opportunity going forward.

There is a lot of work going on today and I feel very confident that we’ve cured the organic growth opportunity. And as Mike said, to this day, our organic growth in this quarter continues and it continues in a very consistent way, which is very comforting, and I joke with him as I saw the results this morning, and it’s just another day in that same linear kind of progression. Once we get some of these other things going, I see those as either in the way I’ve run businesses over the years has been juice to drive top line further or if we have any more difficult in operating environment because of the economy, those will be the items that will offset any erosion that we have to the running rate that we have today. So there’s a lot of opportunity. I’m excited about it. I’m handing the baton off to Chris, and the business is in great shape. He is a good guide by the way. I don’t want to insult him, but he said he seems a lot like me. He comes out of the financial realm. And as many of you guys know, some financial guys turning to great CEOs, some don’t. He’s got that same energy level and get it done and let’s move this forward that I have over the years. And so I think he is just going to do tremendous things with this brand, and I’m excited to see it. I’m a big shareholder. I can’t wait to see him turning that into huge value creation that we rightfully deserve. Thank you so much.

Jake Bartlett — Truist Securities — Analyst

Great. I appreciate all that color. My follow-up question is on what you’re seeing from the consumer — there is obviously some commentary out there that the lower income consumer is pulling back on some spending in, I would think discretionary spending in terms of your brand. What have you seen from that lower income consumer? And then building on that in terms of April and the value inserted with the — inserted with the eat and play. It was that something that you’re going to try to increase or could turn that lever on a bit more as we go throughout the quarter. So it’s really what are you seeing from that lower end consumer at your — at your concept and then — and then how do you think you’re going to respond to it?

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Yeah, it’s funny you say that because we’re not seeing it at all at this point. And my comments about even looking at yesterday’s revenue report, it’s just very, very consistent and orderly across the organization. And so what I also said earlier about as we roll out these new programs, if there is any change in consumer spending, which we’re not seeing at this point, these new initiatives will go to offset that. And I expect that we’re going to ride through this and then have the extra energy as we come through it. So that’s the way I look at it. And I also think — even little things like the events business that we talked about, we still have another 4 percentage points that would improve top line as that comes back and we don’t see any reason why that’s not going to return to its normalized level as we get through into the fall and the late fall, and then the energy that we’ve got around and this is something that is Margo and Mike and I have been working on with the team is — we have this great proposition that would be super for corporate accounts to come and have their events in our stores. And it’s a heck of a lot better than going to a smug [Phonetic] hotel where you’re paying up the nose to have their event room and what you buy a bottle of water at 8 bucks, kind of thing to coming and having a joyful event and coming to Dave & Buster’s and having the meeting and having food and then having everybody shares in having a lot of fun out in your arcade. So we think there’s a huge opportunity there too. So that’s is one area, but we have an enormous number or of opportunities that we are now — you go from the point that your play to be successful to the point at which you start to see that you can be successful and it’s like a tipping point and all of a sudden the inertia of this team, you can see it, it’s very different. And the equity program for the general managers, they’re all seeing their opportunities. So they drive and they don’t come to work and just operate the business. I’m not saying they did that in the past, but they are coming with the extra step in their motion that is going to drive that incremental benefit as we move forward. And I leave it to you guys, anything else.

Margo L. Manning — Senior Vice President and Chief Operating Officer

Yeah, I’m just going to add. This is Margo, that we are — with the stabilized staffing efforts, one of the things that we’ve been able to really get back into in a pretty meaningful way is our local store marketing initiatives, where our GMs are going into their individual communities and looking specifically for where opportunities that they can drive into the stores. So I think that with the ability to pull some of the levers for — off-peak to drive in, more value-oriented guests, I think we’re going to be well positioned to go through the summer.

Jake Bartlett — Truist Securities — Analyst

Great, thank you so much.

Operator

The next question is from Nicole Miller of Piper Sandler. Please go ahead.

Nicole Miller — Piper Sandler — Analyst

Thank you. Good morning. Could you talk a little bit about that continued sequential improvement in the special events? I was wondering about the why and how. I’m curious if the why at all would be tied to the box office, it seems to be some decent movies and I know I just hear anecdotally around my own self a lot of people heading to the theater in that direction and you could be a good place to go before after. Nonetheless, how is it improving, meaning like, who is coming in the exact same guys, or is it a different profile doing something different at a different time? Thanks.

Margo L. Manning — Senior Vice President and Chief Operating Officer

So I’ll jump in and then I’ll let you join. One of the things that we have done over the past couple of months is we invest into our special events structure with a very specific objective. And what we’ve done is bring in stronger sales individuals that go out and are actively soliciting business and having alluded to going after corporate business. So that’s one of the things that we have a sales team, very — very focused on reengaging with past corporate business and uncovering new corporate business, and we’re starting to see some great traction with our outbound efforts, and so we’re encouraged because we sell [Indecipherable] sort of the tip of the iceberg on what we’re seeing there. But in terms of the business coming, we’re seeing social business coming back and we’re most encouraged about the corporate business [Indecipherable] anything you want to?

Michael Quartieri — Chief Financial Officer

Yeah, I think on your point around those the summer season with movies, we are located in the same-center of the number of movie theaters so we do get that extra draw of people coming out of the movie theater, it’s 9 o’clock, it’s a little early, what do you guys want to do. They are able to come into Dave & Buster’s and enjoys a cocktail, a late dinner or few appetizers at that point. So there is a good pickup of business there, but it’s just like any other event. We’ve also done some things where we’ve kind of become point of gathering before other events, whether that’s a concert event or things of that effect. So we are seeing a little bit of pickup in that piece, which is really just about it’s summer time and people are getting back out moving so.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

And Mike, just one thing on that. You’re starting a conversation with a big events business to see if we can transform that into a mutual benefits between the two companies. And the other comment that Margo made on the corporate things. And I’d say the important distinction now on corporate is, and I remember this from when I was CEO of Norwegian Cruise Lines there — they are the order takers and there are the people that go out and fight for new business, and they’re very different people. So we’re delineating the type of person on the corporate accounts that are in receipt of getting orders for events and the ones that are going out and finding new events. And I think that’s going to make a big difference growth as we move forward.

Nicole Miller — Piper Sandler — Analyst

Thank you. And just a final follow-up question more on the numbers. I appreciate the detail around comp and certainly understand the message is continued improvement. Just from a modeling perspective, could we get comps for 1Q ’22 versus 1Q ’21? So if you could share and if it’s out there, I just missed it and I apologize, but the food and bevs comp, again ’22 versus ’21, and the same for amusement?

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Yeah, 71%.

Nicole Miller — Piper Sandler — Analyst

71%, that was on food and bev or total?

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Total [Technical Issues]

Nicole Miller — Piper Sandler — Analyst

No, I know the — I know they’re big numbers. It’s a fix, something that’s how the model’s kind of tick tie, 71% total, Okay. All right, thank you.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Thank you.

Operator

The next question is from Andrew Barish of Jefferies. Please go ahead.

Andrew Barish — Jefferies — Analyst

Hey guys, just one from me also modeling wise, just level setting on. If you could give us the average weekly sales, what that’s running [Technical Issues] acting much if any kind of seasonal drop-off versus the 1Q because historically average weekly sales do go down slightly in the 2Q, but obviously it feels like things are pretty strong right now and a lot of programs still rolling out?

Michael Quartieri — Chief Financial Officer

Yeah, so just to give you a little bit of perspective. So in Q2, usually is run about, let’s say for the first five weeks we were a 186,000 [Phonetic] is or been the average so far and as we look further into the quarter, we expect that to pick up slightly because you are starting to now get into its full-time summer season, kids have graduated, you — so you do get that just normal. I’m on vacation or the staycation, kids are done with school. So you do get a little bit of that picked up on an average basis throughout the course of that — the rest of the summer.

Andrew Barish — Jefferies — Analyst

Yeah, it’s, and is that — is that total are comp AWS Mike?

Michael Quartieri — Chief Financial Officer

That’s total there.

Andrew Barish — Jefferies — Analyst

Okay. And then just secondly, can you give us a sense of how the pricing increases have been received by the guests, particularly on the game that was something that was relatively new to to the strategy, was there any shifting around of gameplay that you saw because of pricing or anything you can share with us?

Michael Quartieri — Chief Financial Officer

No, there really wasn’t much of a change. I think the biggest impact was back in October when we increased the entry points at the kiosk level, which at the same time really wasn’t necessarily a price increase because the consumer still got the same number of equal value of points in relation to the dollars that they were spending, but they would just play the card and finished the cards so you would get that incremental revenue. When we changed some of the pricing at the game level, it just means that the card is being utilized faster. The uptick there then is the opportunity are they recharging. And there has been a little bit of increases in the recharges, but nothing of a significant nature.

Margo L. Manning — Senior Vice President and Chief Operating Officer

And if you’re asking about was there a shift between redemption and non-redemption gains, I’m not sure if that’s your question. We didn’t see anything significant there in terms of shifting in categories of game play.

Andrew Barish — Jefferies — Analyst

Excellent. Yeah, that’s exactly what I was — what I was thinking about Margo. And just finally, can you give us a sense on — on the smaller prototype. I think last two calls was your latest, just kind of what you’re learning from there and how — how [Technical Issues]

Margo L. Manning — Senior Vice President and Chief Operating Officer

Andy, your are breaking up a little bit, so I’m not sure if I heard all of it, that you’re asking about the mini format and how it’s performing. They’re performing really well, and I’ll just give you from an operational perspective they’re a dream to manage. Just flow really well from the guest, really very easy for us to serve the guests because of the design layout and we’re very happy with that and you’ll see more of them.

Operator

The next question is from Chris O’Cull of Stifel. Please go ahead.

Patrick — Stifel — Analyst

Great, thanks. Hey guys, this is Patrick [Phonetic] on for Chris. First, Michael, I wanted to follow up on that last question, but hoping you can help us understand just from a little bit wider perspective the composition of the comp performance in the quarter and the breakdown between traffic and check, just to get a better understanding of sort of what foot traffic is looking like relative to pre-COVID levels at this point?

Michael Quartieri — Chief Financial Officer

From a traffic perspective, it is lower than what we’ve seen pre COVID, but it’s steadily improving. If you remember, right, the company basically let almost every employee, closed every store and has been rebuilding that business ever since. So we’re finally at the point today where we’ve got our full staffing model in place. We’re up to full operating hours. Margo touched a little bit on late night happy hour, which is a great piece of business for us. And so from that perspective when we measure traffic and the fact that the number of items sold, it is lower than what we’ve seen pre COVID but the price of the check is more than offsetting that.

Patrick — Stifel — Analyst

Okay, that’s helpful, thanks. And then obviously, the labor line look stellar this quarter, which is great and I know that’s partly driven or maybe wholly driven by the improved labor model that you guys have implemented, but I’m also curious if there is a portion of that, it’s just indicative of the fact that sales may have picked up even faster than you were expecting and so I’m curious if there is an underlying need to potentially add labor hours going forward and just how we should think about that line as we, as we think about how the rest of the year should look?

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Yeah, we are definitely benefiting from the mix shift into amusement. So if you think about amusement and its profit margin, very little labor is in there, it’s the machine tax and the few folks walking around making sure everyone’s having a good time and attending to the games on the floor as opposed to the food and beverage where you’ve got servers, bartenders, food runners, the whole kitchen staff. So that the labor model is dramatically different between those two pieces of the business. And given the shift to 66% versus 59%, we are definitely benefiting from that. But at the same time, we did take that opportunity to introduce the tablets ex side [Phonetic] and other labor efficiency initiatives on the F&B side, which has helped us be able to continue to serve those customers with a, if it’s a more efficient labor model. So we are benefiting from that as well.

Patrick — Stifel — Analyst

Great, thank you guys.

Operator

The next question is from Jeff Farmer of Gordon Haskett Please go ahead.

Jeff Farmer — Gordon Haskett — Analyst

Great, thank you. On the late March earnings call you had said that you were at roughly 95% of pre-COVID levels on the operating hour front. And the question you just answered, you said that you were closer to full operating hours. So I’m just curious what’s full? How you define full? And when did that happen for you guys? When did you get to that “full” level of operating hours?

Margo L. Manning — Senior Vice President and Chief Operating Officer

Yeah, we, this is Margo. In terms of getting back to the full operating hours, we did it in a phased fashion as the stores were getting back into the staffing levels that we needed, we would push hours back. So it’s not like there’s one date when every store was back to the full operating hours. We did it in a phased fashion through the quarter. But I’m going to say by mid to early May we had all the stores back to pre COVID hours, and I’m doing that from memory, so give and take a couple of weeks.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

And just remember — just remember, the traffic lags that, right? You got to make sure everybody knows we’ve opened those extended hours and that’s the initiatives that we’re taking on right now to make sure that this is a place to be for late night as an example, but other time parts as well.

Jeff Farmer — Gordon Haskett — Analyst

Okay. And then moving onto a separate topic. Loyalty, you shared some color there. Specifically on your loyal member — loyalty membership ranks, including the active ranks. But what I was looking for was in terms of, I guess what percent of your sales do these loyalty customers represent? Has there been any changes there through loyalty members, have a greater visit frequency, anything of that nature that you can provide would be helpful to help us really gauge how impactful this loyalty program has been on your business.

Margo L. Manning — Senior Vice President and Chief Operating Officer

I don’t have that information with me. I will tell you, as we’re building that program, it’s a smaller percentage of the sales right now. We’re excited about the opportunity to leverage that going forward. And so you’ll see more from us in the upcoming months as we have our marketing department maximize that opportunity.

Michael Quartieri — Chief Financial Officer

Yeah, I mean, just to give perspective. When I — when I walked in the door, it was just recently being launched. We cleaned up the back end of it, we kind of juiced it and got it back out there. So the fact that we’ve got 3.65 million users and probably this thing has been rolling out for about less than six months is pretty remarkable for the company that we are and the type of clientele that we have. So it is in the very early stages, very early innings, and there’ll be a lot more to come as our marketing team gets to use this asset, which as Kevin alluded. When we start talking about organic growth, this is just one more arrow for us to have in our back pocket to utilize to drive organic growth and in times of if the economy does slow. This is another opportunity for us to be able to pull to bring more customers in to offset that, so.

Jeff Farmer — Gordon Haskett — Analyst

Thank you for that and just one more. So it’s been roughly 18 months since the company first reported, I think it goes back to the September of 2020 earnings call, don’t holding it out, but that you guys were in discussions with a potential sports betting partner. Can you just help us understand the hurdles to moving forward with partnership or anything else we should be thinking about as it relates to a — a partnership with a sports betting firm?

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Yeah, so as you know, the landscape for sports betting has changed quite a bit with some of the names that you know that are in the space and how the reactions in the market has been to some of their results. Having said that, we’ve broken down this whole sports betting and fantasy sports and is also states with lottery that runs the sports betting aspect. So we’re on the path of now having, it’s — and we’re not going to rush it, but I think we’re very, very close. And we’ve got an announcement coming with three of four different agreements that together I think drive a really fantastic opportunity for this company. We spending in process millions of dollars, just making sure we’ve got all the audio correct in order the sports sections of the stores and that will be all done before pre-season, so we’ll have the right sound systems, we’ll have the right environment, and then we will have this opportunity that should hopefully drive quite a bit of traffic. And as I said early on, once you get these people in for sports betting, they’re going to stay longer and that’s the real economics is another opportunity on the traffic side, they” stay longer, they have another drink or two, they’ll have an appetizer. And so the spending behavior will be exactly what we’re hoping for. And so I would say stay tuned and you will see this in short order. So just looking at the landscape a little bit, we’ve got Main Event probably few weeks away, we’ve got sports betting coming. So we’ve got a lot of very positive announcements for this company coming down the path.

Jeff Farmer — Gordon Haskett — Analyst

All right. Thank you.

Operator

The next question is from Andrew Strelzik of BMO. Please go ahead.

Andrew Strelzik — BMO Capital Markets — Analyst

Hey, good morning. Thanks for taking the questions. My first one, I just wanted to follow up on the loyalty profiles question that was just asked, and maybe from the angle of those that are not active. It seems like it’s a big percentage. So I’m curious is there anything that you guys are actively doing to bring those people back and maybe it’s a function, you said it’s only been six months. Maybe it’s a function of the frequency, but I mean, is there anything specifically that you’re doing to motivate those folks who are obviously prior customers to return?

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Yeah, the great thing about the app is it allows you to have one on one communication, and so that’s the — and that’s what our marketing team is now gearing up for. They have the opportunity now they have the tool. We’re starting to gain the data. As Margo said, 1.9 million of that 3.6 [Phonetic] are active users. So there on the app within the last six months. And so now we’ve got a group of people to now specifically target to get them back into a Dave & Buster’s.

Andrew Strelzik — BMO Capital Markets — Analyst

Okay, great. That makes sense. And then maybe another demographic question. I know early on in the recovery it was mostly the kind of play together, and also I think is let’s kind of trend that the company has used historically versus kind of the families with children and then maybe even down at some point. I’m just looking for an update on that. I’m trying to think through what — what that could mean longer term for the amusement mix and now obviously with the announcement was Main Even, and obviously skewing towards towards the younger customers, so are you seeing that lag in your stores or just broader — broader thoughts on which cohorts are driving the recovery? Thanks.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

I’ll start and then Margo and Mike can take it over. But that’s the whole basis for the transaction. We found this diamond in the rough actually that enables us as we move past the closing date to differentiate the customer base a little bit, whereas Main Event will have more of the families little kids and we’ll have more of the families teens and young adults and adults. So as we move forward, we’ll be able to get a little clearer on that definition, which should drive each of those populations of guests in a powerful way to each brand.

Margo L. Manning — Senior Vice President and Chief Operating Officer

Yeah, and I was going to say, as you’re moving into the summer months, you will see some seasonality come in. So you’ll see an influx of families as we typically do, you see that during the spring break months. But our guests based in our stores looks a lot like it did pre COVID, working families that are coming in stores and families, we’re seeing adults come and the stores had few adults. And then for most of our stores it’s the blend. And so we are, to Kevin’s point, excited about the opportunity to be more prescriptive and more surgical and how we market to the adults and and leveraging the Main Event ability for us to capitalize on family. So we’re excited about that. But right now you’re seeing the guest face in its fullness return to Dave & Buster’s.

Andrew Strelzik — BMO Capital Markets — Analyst

Great. Thank you very much.

Operator

The next question is from Brian Vaccaro of Raymond James. Please go ahead.

Brian Vaccaro — Raymond James — Analyst

Thanks, and good morning. I just wanted to circle back on the quarter-to-date average weekly sales. Sorry, I think my phone broke up earlier in the Q&A. Did you say the average weekly sales of a $180,000 [Phonetic]? And then Mike, could you also remind us what the normal historical seasonality looks like for the last eight weeks, June in July compared to May?

Michael Quartieri — Chief Financial Officer

Yeah, so look. So for 2019 numbers, the first five weeks of the quarter were 186,000 [Phonetic] And then as you transition into the last eight weeks, those numbers increased to about 220,000[Phonetic] So it’s roughly about 118% or I should say an 18% increase up.

Brian Vaccaro — Raymond James — Analyst

Okay, And then current quarter-to-date average weekly sales are up 10% or 12% versus the 186[Phonetic] Can you tell us what the quarter-to-date in the current five weeks is?

Michael Quartieri — Chief Financial Officer

Well, we’ve communicated what the comps are is up 12% — 12.2%.

Brian Vaccaro — Raymond James — Analyst

Okay. On the margin front, I wanted to ask about labor. Margo, I was wondering if you could provide some more specifics may be on the labor efficiencies that you’ve realized during COVID and maybe just how the new service model compares to pre COVID, whether it’d be average number of salaried managers per store, server hours in average station sizes, or any other metrics you think might be worth highlighting?

Margo L. Manning — Senior Vice President and Chief Operating Officer

In terms of the management part and stores, we are slightly reduced in our management part pre COVID. And from an ROE perspective, I don’t have concrete, let’s say what a high — the staffing levels, they’re about 90 –about 90% of what we were pre-COVID. And I do want to keep in mind that we do have some pockets of markets that aren’t completely stopped yet. So I’m talking about it holistically. So I just — I just want to be mindful of that. We are excited about the new service model, it was a phase rollout also through Q1. Every store was officially live on at the end as May. The early results I indicated or the results that we put, the stores have come on, have been really promising as it — as it relates to the guest experience. So you’ll hear more about as we get fully seated in it in the upcoming months.

Brian Vaccaro — Raymond James — Analyst

Okay. And yeah I guess elaborating on that a bit on in terms of the guest experience, do you have any — that’s on average table turns or getting food out of the window and also just maybe the percentage of guests or sales on F&B that is occurring over the mobile digital ordering system?

Margo L. Manning — Senior Vice President and Chief Operating Officer

In terms of the mobile digital ordering, I don’t have that information right now. We have the ability to track that. It’s a, it’s a fairly manual process and we’re working to automate that. So I don’t have the change in that. I will tell you in past when we moved from — that we moved to the new service model, we saw that was down to mid teens in terms of the number of guests that we’re selecting, the ex sign options that you had, more guests gravitate towards the full experience, although I don’t have the current reporting on that. So I’m giving you information from one that was tapped [Phonetic]

Brian Vaccaro — Raymond James — Analyst

Okay, great, that’s helpful. And then just one last one from me. I wanted to ask about the other operating cost line. Can you help us bridge what drove the increase in spend there? I think it was into the 120s — low-to-mid $120 million range, but compared to a quarterly spend that’s been below $110 million [Phonetic] in the last several quarters. And then could you also just speak specifically to the marketing spend in the quarter and how you expect that to progress through the year? Thank you.

Michael Quartieri — Chief Financial Officer

Well, kind of speak on the marketing aspect of it. So, remember we did the eat and play combo advertisement within the month of April. So there was a nationwide campaign that went along with that. That was roughly, let’s say, about $5 million in total of marketing spend, and so that was one of our largest campaigns, then you get to a more normalized level of marketing throughout the rest of the year.

Margo L. Manning — Senior Vice President and Chief Operating Officer

And I’m not sure about the second part of your question. Can you clarify what you’re asking for, I mean, the — its an increase because we have more stores, I’m not sure what you’re asking about, can you rephrase that for me?

Brian Vaccaro — Raymond James — Analyst

Yeah — yeah, I was just, I mean, you should even look at it on a cost per operating week basis if you’d like, but it did seem like a pretty noticeable step up sequentially in other operating costs and part of it. I appreciate the $5 million, Mike, on the marketing side, but just curious if there were any other cost that came back, whether it be repair and maintenance or anything that stood out? Just as thinking about the normalization in the cost structure of the business as we exit Omicron.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Yeah, look, I think the only other aspects I could –that comes to mind that it would have enough of — enough of an impact on an individual lining basis to cover on the call would be outside services. So if you think about that, you’re cleaning crews, things to that effect. And so when you’re in the late — a tight labor market where you’re trying to hire people back, it was more for us from a operation standpoint to hire people for the front line to serve customers and then outsource some of that cleaning and back-office type stuff. Security would be another one of those aspects. So that would have been probably the biggest contributor to that.

Brian Vaccaro — Raymond James — Analyst

Great, that’s very helpful. Thank you.

Kevin M. Sheehan — Chair of the Board and Interim Chief Executive Officer

Which by the way is also an opportunity as we get to more normal staffing levels and as we progress forward in this environment for us to be able to then go look and bringing back in sourcing that as an opportunity to improve margins at that point.

Margo L. Manning — Senior Vice President and Chief Operating Officer

Which we’ve actually already started to do.

Operator

[Operator Closing Remarks]

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