Dave & Buster's will raise prices on games soon, after boosting the buy-in by 33%

By Tomi Kilgore

Food and games company looks to boost revenue and cash flow by implementing new regional game-pricing strategy

Dave & Buster's Entertainment Inc. will soon raise prices on games in certain regions, as the entertainment- and dining-venue operator looks for ways to boost profitability, revenue and cash flow.

During the company's (PLAY) post-earnings conference call after Wednesday's closing bell, Chief Financial Officer Mike Quartieri said the regional pricing plan for games will be no different than that for food and beverages, which usually cost more in major metropolitan areas than they do in smaller towns.

"Right now our limitation is that all pricing for all games is consistent across the entire system," Quartieri said, according to an AlphaSense transcript. "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."

That follows a 33% bump in price of the buy-in rate card at in-store kiosks that was tested late in its fiscal second quarter.

"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," Quartieri said. "We adjusted those rate cards to actually start with $20, and it goes from $20 to $30 to $40 to $50."

And as Chief Executive Chris Morris said on the call, he believes the new game-pricing strategy will provide the company with "meaningful" additional revenue, cash flow and adjusted earnings before interest, taxes and depreciation and amortization (Ebitda), while prices still remained below its peers.

The pricing moves come as the company reported fiscal second-quarter profit, revenue and same-store sales that missed expectations.

The stock sank 6.1% Thursday to $35.11, the lowest close since June 6. It has tumbled 11.6% amid a three-day losing streak, and has plunged 25.0% since closing at a 14-month high of $46.83 on July 24.

Late Wednesday, the company reported net income for the quarter ending July 30 of $25.9 million, or 60 cents a share, compared with income of $29.1 million, or 59 cents a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share rose to 94 cents from 85 cents but missed the FactSet consensus of 95 cents.

Total revenue grew 15.7% to $542.1 million, but was below the FactSet consensus of $558.4 million. Entertainment revenue increased 15.9% to $360.8 million, but missed expectations of $369.6 million, while food and beverage revenue rose 15.5% to $181.3 million, below analysts' forecasts of $189.5 million.

Same-store sales, or sales of stores open for a full 18 months, fell 6.3%, worse than the FactSet consensus for a decline of 3.3%.

Separately, the company said it doubled its share repurchase authorization to $200 million, from the $100 million that remained at the end of the second quarter.

The stock has slipped 0.9% year to date, while the S&P 500 index SPX has gained 15.9%.

-Tomi Kilgore

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09-08-23 0734ET

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