Dave & Buster's Q3 2026: Contradictions Emerge on Marketing Strategy, Remodel Impact, and Same-Store Sales Targets

Date of Call: None provided

Financials Results

• Revenue: $448.0M, comparable store sales decreased 4% YOY
• EPS: Net loss of $1.22 per diluted share; adjusted net loss of $1.14 per diluted share
• Operating Margin: Adjusted EBITDA margin of 13%

Guidance:

• October same-store sales down ~1% with November showing continued improvement; management expects sequential improvement into Q4.
• New menu launched in October driving higher average checks and positive F&B comps.
• Systemwide rollout of Human Crane to complete; plan to introduce ~10 new games in 2026 to drive repeat visitation.
• Three remodels under construction; six remodel openings planned in next five months; four international openings expected in next six months.
• Focus on converting operating cash flow to free cash flow while maintaining disciplined CapEx and double-digit store growth.

Business Commentary:

* Improvements in Same-Store Sales: - Dave & Buster's reported sequential improvement in same-store sales each month during Q3, culminating with a final month down only roughly 1% compared to the previous year. - The improvement was driven by the execution of the Back-to-Basics plan, including enhanced marketing, improved food and beverage offerings, and operational excellence.

• Food and Beverage Performance:
• The company's food and beverage sales were positive for the second consecutive quarter, with traffic in dining rooms up meaningfully year over year.

• The improvement was attributed to the launch of the Back-to-Basics new menu and initiatives like the Eat & Play Combo, which enhanced the guest experience and increased average checks.

• Games Innovation and Consumer Engagement:
• Dave & Buster's plans to introduce 10 new games in 2026, with strong IP-driven launches anticipated to attract customers and drive repeat visitation.

• The focus on innovative games and partnerships has contributed to increased guest spend and time in the Midway, supported by successful test results.

• Remodel Program and Cost Efficiency:

• Dave & Buster's has optimized its remodel prototype to increase traffic and productivity, with a planned opening of six new remodels in the next five months.

• The company has identified inefficiencies in previous remodels and now focuses on high-return investments, aimed at enhancing guest experience and supporting revenue growth.

• Strong Financial Foundation and Cost Management:

• The company generated $58 million in operating cash flow during the third quarter and ended with $442 million in total liquidity.
• Enhanced cost management processes and a comprehensive initiative to identify material efficiencies are expected to support continued margin expansion and free cash flow generation.

Sentiment Analysis:

Overall Tone: Positive

• Management: "sequential improvement in same-store sales each month, with the final month of the quarter down only roughly 1%"; CFO: revenue $448M, adjusted EBITDA $59M (13% margin); CEO: "Back-to-Basics...driving measurable improvements" and confidence in driving margin expansion and free cash flow.

Q&A:

• Question from Eric Wold (Texas Capital Securities): With the marketing messages you've been trialing, what resonated with consumers — promotional offers or top-of-mind marketing? Also, as you market a combo of F&B and games, are you seeing changes in time spent or spend per consumer in the Midway?
  Response: Smart value combo offers (Eat & Play Combo) resonate and drove traction; guests are spending more time and money in the Midway, and Human Crane rollout plus new games pipeline should further boost engagement.

• Question from Andrew Strelzik (BMO Capital Markets): Given high brand awareness, are refinements to the media mix sufficient or will you increase marketing spend to broaden reach and reinforce updated messaging? And on remodels, are you still seeing ~700bps outperformance and what are the key learnings?
  Response: Management will use a more data-driven media mix to improve conversion (not just more spend); remodels remain highly effective (~700bps uplift) but will be optimized to cut non-impactful CapEx and deliver better ROI.

• Question from Sharon Zackfia (William Blair): As food is strengthening, did entertainment comps also improve through October, and how should we think about November and unit-level margin recovery — what comps are needed for margin expansion?
  Response: Entertainment comps improved sequentially and November performed similarly to October; management believes margins can expand even with flattish same-store sales via margin-enhancement initiatives.

• Question from Brian Vaccaro (Raymond James): The two-year stack decelerated sequentially — can you elaborate? Also, were November comps similar to October (around -1%)? How did walk-in vs. corporate events perform and how is holiday/event pacing?
  Response: Two-year stack softened due to a weaker start to the quarter; November comps were similar to October (~-1%); special events grew mid-single-digits year-over-year and are pacing well for continued Q4 growth.

Contradiction Point 1

Marketing Strategy and Media Mix

It involves changes in the company's marketing strategy and media mix, which directly impact customer engagement and revenue.

Are marketing media mix refinements sufficient, or is increased investment needed? - Andrew Strelzik (BMO Capital Markets)

2026Q3: Data-driven media planning is key. Reach is essential, but converting reach to customers is crucial. Investment in data and testing will enhance future marketing efforts. - Tarun Lal(CEO)

Can you address the underlying comparisons in Q4, particularly calendar shifts? - Andrew Barish (Jefferies)

2024Q3: We're investing more in data to give us better reach and more efficient marketing. We're going to see more of that go into TV in Q4 and we'll start seeing that next year. - Michael Quartieri(CFO)

Contradiction Point 2

Remodel Performance and Impact

It involves the performance and impact of the remodel program, which is crucial for enhancing customer experience and driving revenue growth.

What are the key learnings from the refined remodel prototype, and how does it affect remodeling performance? - Andrew Strelzik (BMO Capital Markets)

2026Q3: Remodels have a positive 700 basis point impact. Focus is now on investing in areas directly impacting guest experience, reducing costs by eliminating ineffective spend. - Darin Harper(CFO)

Has the remodel program accelerated compared to previous expectations? - Brian Mullan (Piper Sandler)

2024Q3: We got 50 stores under remodel completing 43 to date and we believe the remodeling pace is supporting sales momentum in 2024. We expect to see the benefits of the remodeling effort to impact our comparable sales momentum and our guest metrics. - Michael Quartieri(CFO)

Contradiction Point 3

Entertainment Comps and Margins

It involves changes in entertainment comps and unit-level margins, which are critical financial metrics for the company's performance.

Did entertainment comps improve in the second half of the quarter, and what unit-level margin improvements are possible? - Sharon Zackfia (William Blair)

2026Q3: Unit-level margins can expand with similar comp trends as seen in Q3. - Tarun Lal(CEO)

How do you plan to grow loyalty membership and what current initiatives are in place? - Jeffrey Farmer (Gordon Haskett)

2024Q3: While Q4 comps are expected to be below Q3, we believe they will be slightly ahead of Q4 last year and improve over the prior year levels. - Michael Quartieri(CFO)

Contradiction Point 4

Marketing Investment and Effectiveness

It involves differing views on the effectiveness of current marketing investments and whether increasing investments is necessary, which impacts strategic decisions and financial planning.

Is the current marketing media mix refinement sufficient, or is increased investment required? - Andrew Strelzik (BMO Capital Markets)

2026Q3: We believe the current marketing spend level is adequate. We're refining our media mix for effectiveness without the need to increase the investment amount. - Tarun Lal(CEO)

Does Dave & Buster's need to boost marketing investments to drive traffic? - Brian Mullan (Piper Sandler & Co., Research Division)

2025Q2: Data-driven media planning is key. Reach is essential, but converting reach to customers is crucial. Investment in data and testing will enhance future marketing efforts. - Tarun Lal(CEO)

Contradiction Point 5

Same-Store Sales Growth Target

It involves the company's stated long-term growth target for same-store sales, which is a critical metric for investors and stakeholders.

Which consumer segments are responding to your new marketing strategies, and has consumer spending shifted between games and food? - Eric Wold (Texas Capital Securities)

2026Q3: We are targeting sales growth of 3% a year. - Tarun Lal(CEO)

Can you provide predictability of same-store sales trajectory and how you assess it on a multi-year basis? - Andrew Marc Barish (Jefferies)

2025Q1: We are in the early stages of recovery, with a long way to go. The focus is on fixing the business and getting it to the right cadence. The long-term goal is to grow same-store sales by 3% annually. - Kevin M. Sheehan(IBC&Interim CEO)