Good day and welcome to the Dave & Buster's First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Cory Hatton, Vice President, Investor Relations and Treasurer. Please go ahead.

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 first quarter 2024 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 measures contained in our earnings announcement released this afternoon. Also, the presentation we will be referencing today will be made available on the events and presentations page of our Investor Relations website shortly after the conclusion of the call. And with that, it is my pleasure to turn the call over to Chris.

Alright. Thank you, Cory. Good afternoon, everyone and thank you for joining our call today. I will begin with some brief highlights from the quarter, turn it over to Mike to walk through our first quarter financials, and then we will spend the remainder of the call presenting a status update on our strategic growth initiatives as we lap the one-year anniversary of our Investor Day last June. In our first quarter of fiscal 2024, we generated revenue of $588 million and adjusted EBITDA of $159 million. While these top-line results were well below the potential we see for this business with the choppiness we alluded to in February, we are encouraged by more recent improving top and bottom-line trends in May and early June as we have scaled some of our more successful organic growth initiatives. Additionally, during the quarter, we realized more than $10 million of incremental labor and marketing costs associated with the rollout of new initiatives and certain marketing tests, which we do not expect to repeat going forward. We continue to make material progress advancing our key organic growth initiatives. We have seen meaningful success growing our loyalty database through our new marketing engine, highlighting our enhanced food and beverage offering through compelling promotions, refining our games pricing strategy, driving incremental special events, and clear outperformance in our remodel initiative, which we expect would lead to substantial improvement in revenue and profitability over the medium term. We also continue to open new stores at highly attractive returns on our investment and have continued to opportunistically return capital to shareholders via our share repurchase program in a highly accretive manner. I'm proud of the hard work of our dedicated team as we continue to deliver strong operating performance and generate significant free cash flow in the face of a difficult prior year comparison and the complex macroeconomic environment. We remain laser-focused on delivering the $1 billion adjusted EBITDA target in the coming years. I'd now like to turn the call over to Mike to walk you through our first quarter financial results in more detail before turning to the update on our strategic growth initiatives.

Thanks, Chris. We generated first quarter revenue of $588 million and adjusted EBITDA of $159 million for an adjusted EBITDA margin of 27.1%, a 200-basis point margin expansion versus the same period in 2019. As Chris mentioned, adjusted EBITDA in the quarter decreased in part due to $11 million of incremental costs, which we do not expect to repeat, which includes labor and marketing costs related to the rollout of our new menu, our new service model, and the deployment of several new systems, as well as an unsuccessful incremental marketing campaign test. Net income in the first quarter totaled $41 million, or $0.99 per diluted share. We reported $46 million of adjusted net income or $1.12 of adjusted earnings per diluted share. Reconciliations of all non-GAAP financial measures can be found in today's press release. Comparable store sales decreased 5.6% on a same-week basis in the first quarter versus the prior year period. As Chris mentioned, we have seen an improving trend in this important top-line metric through the first five weeks of this quarter. We generated $109 million of operating cash flow during the first quarter, contributing to an ending cash balance of $32 million for total liquidity of $516 million when combined with the $484 million available on our $500 million revolving credit facility, net of outstanding letters of credit. We ended the year or should say the quarter, with a total net leverage ratio of 2.3 times as defined under the credit agreement. We entered into a sale-leaseback agreement for the sale of two additional Dave & Buster's stores that opened in 2023 and anticipate generating $45 million of gross proceeds from the sale in the second quarter. After this sale, we still have four owned and operating real estate assets and two additional wholly owned stores coming online in the second half of 2024. As a reminder, we expect to command a premium price in the market versus other comparable real estate given our superior economic unit economics, strong credit, and attractive brand attributes, and commitment to being a long-term tenant in the space. Turning to capital spending we've invested a total of $113 million in capital additions during the first quarter, opening three new Dave & Buster's and one new Main Event. We've already opened one new Dave & Buster's during the second quarter of fiscal 2024 in Port St. Lucie, Florida. We expect to open a total of 15 new stores across both brands during fiscal 2024. We also have eight incremental remodels coming online in the second quarter to add to the nine existing remodels and anticipate having a total of 45 done by the end of fiscal 2024. Thus far in fiscal 2024, we have spent $50 million repurchasing nearly a million shares, and we have $150 million remaining on our board-approved share repurchase authorization. We see tremendous value in continuing to opportunistically repurchase our shares in an accretive manner with the excess free cash flow above and beyond what is then needed to invest in our new units, accelerate our remodel program, and support our organic growth initiatives. And now I'd like to turn the call back over to Chris to walk through the presentation and update on our key organic growth initiatives.

All right. Thanks, Mike. As I mentioned at the start of the call, tomorrow marks the one-year anniversary of our Investor Day where we first unveiled our medium-term strategic plan. So we thought it was important to provide a more wholesome status update on how we are tracking against this plan. We have made meaningful progress on all of our initiatives, which in their own right are meeting or exceeding expectations. We've also discovered new opportunities and initiatives ranging from food and beverage realized check to our optimized remodel strategy to additional incremental cost savings. We expect a substantive impact over the next several months from these initiatives scaling and rolling out from the successful test we have run. Consequently, I remain confident in our target of over a billion dollars of adjusted EBITDA. We have made significant strides advancing each of our six key organic growth initiatives. However, as you can see on the right-hand side of the slide, we are still in the early innings of most of these initiatives with meaningful upside to come. Within marketing optimization, which remains our largest revenue and adjusted EBITDA opportunity, we began by getting the right team in place and hired a new top-notch CMO in December 2023. Megan has been phenomenal. In her first six months, she has embraced our culture and added a significant amount of data-driven rigor to our marketing engine. Under her leadership, we have engaged a new creative agency, meaningfully grown our loyalty program metrics in terms of both members and spend, and substantially improved our customer engagement. Within our strategic game pricing initiative during Q1 2024, we successfully completed the first increase in chip prices in over 20 years with a significant overhaul of our game system. This was just the beginning of our process to optimize game prices as we have run a number of tests of different price levels across the portfolio to try to determine the optimal level for each store. While we have done this, we've experienced significant improvement in our amusement guest satisfaction scores, spend, and sales trends. In our improved food and beverage initiative, we successfully implemented a new service model and throughout Q1 2024 and into Q2 2024, we have rolled out multiple phases of our new menu across the system. We have experienced improved food and beverage guest satisfaction scores, attachment, check size, overall sales trends, and gross margins as we have done this. More recently, we have identified an additional revenue opportunity from optimizing our food and beverage pricing and menu mix, which we will describe in further detail later. As you know, to date we have opened nine remodels with four fully programmed remodels performing exceptionally well, up double digits in both sales and traffic relative to the prior year. Given the strong success, we've accelerated our remodel plans and have optimized our strategy to lean in on the success of these fully programmed stores to bring as many to market as possible with a strict 20% return on investment. On special events, in order to provide more accountability at the local level, we strategically reinserted 20 sales managers into the stores in the back half of 2023 and ensured that their compensation was tied to top-line performance. We have seen significant outperformance relative to the rest of the system of those stores relative to both prior year and 2019. Based on that success, we've added over 30 additional sales managers in fiscal 2024 to date. We expect this to have a meaningful positive impact on the revenue trends in this segment, which are already approaching 2019 levels overall. In our tech enablement initiative, the team has worked efficiently to upgrade our IT infrastructure across the portfolio, which includes, amongst other items, outfitting our stores with Wi-Fi and upgraded payment processors which will improve guest experience and drive operational efficiencies in our stores. To date, we have completed over 50% of the system. We also rolled out server tablets across our whole system as part of the enhancements to our new service model. Turning to new units, we have opened 15 new stores domestically in the last 12 months and continue to produce sizable cash on cash returns consistent with our historical levels of 40% plus. Internationally, we signed up seven additional international franchise units committed to development, bringing our grand total to 38. In terms of cost savings, we realized all of the $25 million in upsized, targeted synergies from the Main Event merger and continue to go after additional opportunities as we make solid progress on the incremental $40 million to $60 million outlined at Investor Day. In the coming months, we have a lot planned on each of our initiatives. On marketing optimization, we will continue to optimize our media mix and messaging and leverage our scale and presence to drive traffic. We also have a number of partnerships that we expect will help improve traffic and sales trends. We are particularly excited about a number of these partnerships and the potential impacts they will have during the summer movie season as well as the upcoming fall and winter sports seasons. We believe there is still significant upside on games pricing. Through overhauls to our games system, we now have the functionality to have differentiated pricing by region. We will use that new functionality to continue to optimize the price levels of our stores. We will also make sure that going forward we will raise prices in line with inflation, something that we have not done historically. Additionally, we are excited by the prospect of optimizing existing and developing and implementing new yield management strategies which should help drive check during peak periods and traffic during off-peak periods. We are launching the next evolution of our new menu in August, which is primarily focusing on beverage innovation and our special event menu and we will continue to refine and improve the operating model to drive attachment and guest satisfaction scores, which continue to be at historical highs. We will increase the pace of remodels and expect to have 35% of the fleet completed by the end of 2024, 68% completed by 2025, and 100% by 2026. Given the encouraging results with our pilots, we plan to continue to add special event managers to our stores and markets and expect to benefit from our improved special event menu, operating model, and event management capabilities. We plan to complete the integration of our new IT infrastructure in the coming quarters and implement new POS systems to optimize workflow across our stores. We are on track to open 10 more stores in 2024, with 16 additional units hitting our fleet each year in 2025 and beyond. We expect to have several international stores open in the coming months and we will continue to leverage the D&B brand to drive more international franchise agreements. We have historically executed on our cost savings initiatives and think there is still a lot of opportunity. It is an ongoing focus for us and you can expect to see more progress on that front in the near future. As we have been focused on executing on our plan, we have identified three incremental opportunities to keep driving our performance. On food and beverage as we will show you later, we have realized significantly less price compared to our peers and believe there's an opportunity for us to optimize our prices and menu mix in order to close this gap. As we've discussed, our remodels continue to deliver impressive results and we believe there's a strong opportunity to accelerate and improve the pace of these remodels. On cost savings due to additional efforts, we believe we can take out another $10 million to $20 million in addition to what we announced at Investor Day. As I mentioned earlier, our marketing and optimization strategy is progressing and our key performance indicators are clearly highlighting that. Hyper-targeted promotions and data-driven insights are helping us craft unique campaigns that have helped us drive website visitors up 49% and our social media engagement up multifold. Loyalty members who, let me remind you, spend more and visit 2.5 times versus non-members are up 23%, which we think is very meaningful in driving spend and traffic. We believe that these strong leading indicators that customers are thinking about and engaging with us more, coupled with our other initiatives, will ultimately lead to strong same-store sales growth. As we discuss, yield management is an important part of our strategy. One element of that is using targeted promotions to drive traffic during off-peak periods. During the quarter, we tested a number of promotional messages to help bring in incremental customers during the week. As you can see on the page, while same-store sales were up versus prior year, during the week, we were most excited by the almost 11% improvement in sales trends. It shows that we have started to identify some levers that can meaningfully drive the business. We will continue to test and learn in order to find the optimal mix of promotional messages in our media. As you know, we believe that our amusement offering is significantly underpriced. We showed you last year that D&B hadn't increased its chip pricing for more than 20 years and that the prices of our games were meaningfully below the prices of our competitors. We have and continue to believe that there is scope for us to thoughtfully increase our game prices while still remaining an attractive value proposition to our guests. During the quarter, we experimented with a number of different price levels across the system, while we saw an improvement in amusement sales trends universally; what got us most excited was that the stores in the highest price increase tiers actually saw the biggest improvement and have turned positive in amusement same-store sales. Notably, we've experienced significant year-over-year increases in customer satisfaction despite these changes to price levels, which means that they are not materially negatively impacting the customer experience. We are very encouraged by these results and we will be moving a significant number of stores onto those pricing structures in the second quarter and beyond. As we have previously discussed, we've been making a lot of improvements to our food and beverage offering in order to drive attachment, guest satisfaction, and ultimately sales. Our speed of service is up meaningfully as our attachment and guest satisfaction scores. We are encouraged by these results and importantly, as we rolled out the new menu and service model, we saw improving food and beverage trends throughout the quarter and subsequent to the quarter. We will continue to drive these guest metrics and expect them to continue to drive top-line improvement over time. As we mentioned earlier, we have also identified another significant opportunity within food and beverage, specifically around realized check. The chart on this page lays out a number of publicly reported peers and their check growth relative to 2019. As you can see, on average, the peers increased check by about 22%, which is roughly in line with CPI growth over the same time period. And you can also see D&B has only realized approximately 6% check on its food and beverage relative to 2019. Upon investigation, we discovered that we took fewer price increases than our peers since COVID and we also discovered that a menu change that was made in 2021 was well-intentioned, but actually was constructed in a way that incentivized trade downs. We've been testing a few different ways that we can close the gap. Our initial tests have been encouraging. More to come on this topic as we learn and explore more, but we do believe that over time we should be able to close a significant portion of that gap. Our remodels are delivering significant sales and traffic growth consistently and we are highly encouraged by the results and excited by the opportunity to implement this across the board. In aggregate, we have seen success and increased year-over-year sales in the remodels we have opened to date. However, what has been most encouraging is that our fully programmed remodels have driven double-digit growth in sales; even more encouraging is that these remodels are also up double digits in traffic. Our plan is for almost all of the remodels going forward to be fully programmed, and we expect to have 35% of the system complete by 2024 and 100% done by 2026. As you can see, our strategy around in-store sales managers for special events is bearing fruit, and stores with an in-store sales manager have significantly outperformed the system. This is what we expected as we strongly believe that local accountability and the right incentive structure can lead to meaningfully improved results in this area. Given these strong results, we've accelerated the placement of managers and will place three times more managers in stores in 2024 as compared to 2023. We believe having a sales manager will significantly impact the recovery of our event business to 2019 levels and beyond. Our new unit model continues to be highly compelling with our 2022 and 2023 cohorts delivering 40% ROIs consistently. We continue to believe in the long-term potential of 550 stores, which we estimate is an EBITDA opportunity of $150 million to $225 million with long-term potential of 550 stores in total. We continue to make progress on the international front. We've signed seven new franchise stores since Investor Day with a total pipeline of 38 international locations. We expect to have the first international locations open within the coming months, which will be a huge milestone for the company. As we highlighted at Investor Day, we believe we trade at a very low valuation and there is significant upside to our share price as we continue to execute on our key initiatives. Given the strength of our business model as well as the clear and actionable opportunities for growth we see in this business, we do not believe D&B's current trading multiple is warranted and we believe our stock is materially undervalued. To that end, we continue to be laser-focused on executing on the most lucrative opportunities to deploy or return capital to shareholders. To date, we've repurchased $50 million of shares and since 2023, we have repurchased almost 9.5 million shares, representing approximately 20% of outstanding shares. We will continue to weigh the most optimal uses of cash and monitor the share price and valuation levels to appropriately repurchase shares as the opportunity arises. So, in conclusion, we've made significant progress on each initiative outlined during the 2023 Investor Day, but also want to remind you that most of these initiatives are in their early innings. In fact, we increased internal expectations on a number of initiatives, including food and beverage improvement, remodels, and cost savings, and we remain confident in our target of a billion dollar adjusted EBITDA. Given what we know about our business and its potential, we see our stock as meaningfully undervalued and we would expect to see meaningful equity value appreciation as we scale and roll out our initiatives. So with that operator, please open up the line for questions.

Thank you. We will now begin the question and answer session. The first question comes from Jake Bartlett with Truist Securities. Please go ahead.

Great. Thanks for taking the question. My question was about the traffic. I assume that your pricing increase, your food and beverage, and your game price initiatives should have driven check-up and price up. So to me, it looks like traffic has decelerated. So the question is, what is driving that deceleration? I imagine it's macro pressures, but I'd like to hear from you. It sounds like your initiatives, you're encouraged by your initiatives, yet it does look like traffic is decelerating at this point. So any comment there would be helpful.

Yes, Jake. First, I want to clarify that we do not provide a breakdown between check and traffic, and we haven't for quite some time. This is because traffic is simply an estimate for our business rather than an exact figure, considering how our stores are structured and how customers interact with them. That said, the macro trends remain complex and challenging. However, as we mentioned earlier, we are encouraged by the improvements we've observed throughout the quarter as our initiatives begin to take effect. These initiatives include both pricing and traffic strategies, which have started to show positive results, giving us confidence as we advance, especially since many initiatives are just now gaining traction. Additionally, I want to highlight our remodel projects. We’re excited about the progress from our fully programmed remodels, which best illustrate our strategic vision moving forward. They encompass all our efforts along with new product offerings and a refreshed store aesthetic. As we've noted, we are experiencing significant improvements in these remodeled locations, including double-digit sales increases and traffic growth. While the macro environment is complicated and brings some challenges, we remain optimistic about our direction.

Got it. Great. As a follow-up, you mentioned the improvement in the last five weeks, especially in the last several weeks. What do you think is driving that improvement? Is it primarily due to your actions? Perhaps you could elaborate on how some of these initiatives are scaling. Can you clarify which initiatives are becoming more impactful as the year progresses and as the second quarter moves forward, aside from having more remodels?

During the quarter, we introduced our new menu alongside a new service model, both aimed at enhancing the guest experience and helping our operators succeed by increasing throughput and boosting food and beverage sales. While it's still early, the initial results are promising. These initiatives were properly tested, and we've demonstrated our commitment to them. Our management team is thorough and methodical; we test, learn, refine, and implement. The new menu and service model are performing as intended, matching what we observed during tests, which is encouraging. However, we are still in the early stages and anticipate these initiatives will contribute to increased sales. Our Half Off food promotion, along with various marketing strategies, has successfully generated demand during off-peak times from Monday to Thursday. We have promotions like All-You-Can-Eat wings on those days and the ongoing appeal of Half Price games on Wednesdays, complemented by a Half Price food offer through loyalty programs. We're pleased with the midweek results from these initiatives. Overall, we have several strategies in place for pricing and traffic that are all functioning effectively at different levels, and we expect to continue gaining momentum as we move forward.

Great. Thank you.

You bet. Thank you.

Your next question comes from Sharon Zackfia with William Blair. Please go ahead.

Hi. Good afternoon. I had some questions around the kind of full remodels. When we think about that and the ramp you're having, can you talk about kind of the downtime that you see or the inefficiencies while you're doing the remodels? And then how quickly kind of the labor normalizes once the remodel is complete? I've noticed there does seem to be some kind of labor optimization that has to occur when the new units or I should say the revamped units are kind of fully out there. And just curious on how we should think about that as you ramp this up aggressively.

In terms of the construction period, it's around eight weeks, during which the units experience some negative pressure. We keep the units operational. Our construction development team is highly experienced and skilled at managing remodels in a way that minimizes disruptions for guests, allowing us to remain open. However, we do observe a slight negative effect on comparable sales for about eight weeks. As we undertake more remodels, we plan to measure this impact to better understand our comp performance. It's also important to highlight that when we discuss the sales increase, we are excluding this construction period. Therefore, the improvement seen from remodels reflects genuine growth. Regarding labor optimization, now that our service model is implemented, our teams have become very efficient. We have been focusing on this for a long time, and we do not anticipate any labor inefficiencies after the remodel. We expect to be operating at optimal levels from day one.

Can I ask a follow-up? I know you just have a handful right now. How are you planning to kind of grow customer awareness of the revamped offerings as this rolls out more broadly?

That’s a great question, and we’re really excited about the results we’re achieving through local awareness. As we scale up, we will be able to increase awareness on a national level for our new product offerings and experiences, which we believe will serve as additional motivation. For each remodel, we engage in local activation to involve the community before the opening and generate excitement. We collaborate with micro-influencers to spread the word, utilize earned media, and also implement paid media, all focused on the area surrounding the store. This strategy is executed entirely at the local level.

Okay. Thank you.

The next question comes from Andrew Strelzik with BMO. Please go ahead.

Hey, good afternoon. Thanks for taking the questions. I guess my first one and then I have a follow-up, but my first one, there's obviously a lot of initiatives that you guys are working on, and so I'm just trying to think about the sequencing or how you guys are going to be layering those in. And so can you kind of help frame what could be most impactful in fiscal 2024 versus what will be more kind of 2025 and beyond?

Certainly. The pricing initiatives we've implemented through our strategic game pricing are performing exceptionally well. Importantly, there has been no discernible impact on guest satisfaction scores; in fact, satisfaction scores have increased in the locations with the highest price raises. This is significant for two main reasons. First, we now have the capability to manage pricing across our entire range of products, not just food and beverage. This new capability allows us to drive pricing through our game offerings, which account for two-thirds of our business. Second, as we approach the end of the year, we anticipate advancing our technology, allowing us to introduce a more flexible pricing model by the end of 2024. This flexibility will enable us to better capitalize on peak and off-peak times, which excites us. The pricing strategy for our games is substantial, but we must also acknowledge the improvements we've made in food and beverage and our new service model. Our guest experience metrics reflect a clear positive impact from these improvements. We firmly believe that enhancing the in-store experience is the best path for business growth. I am confident that the combination of our food and beverage offerings and our new service model will maintain momentum as we move forward. Our teams will continue to improve their skills, providing elevated service, which we expect will lead to increased repeat business from guests. Overall, I feel optimistic about this combination.

Okay. That's helpful. And then my follow-up is on the visitation, I guess, between cohorts, specifically your loyalty customers, where you're seeing nice growth in membership there, and the non-loyalty customers. I think you said, if I got this right, that your loyalty members visit 2.5 times as often as regular members. A year ago at the Investor Day, you said that was, I think, 1.5 times. And so you're seeing that gap widen. So I guess is that a function of just the traction that you're seeing with the loyalty members, or are you also seeing moderation in kind of your less frequent customers underneath that? I guess I'm just trying to think about the drivers there and the implications. Thanks.

Yes, we're really excited about that metric. Transitioning from 1.5 times to 2.5 times is significant. We've also seen a 23% increase in our loyalty membership. This reflects our commitment to prioritizing this area of the business. We have a team of exceptionally talented people who are focused on the right metrics, employing a test and learn approach, and engaging with our loyalty members more effectively. The improvements are evident in the metrics, and we believe we'll continue to enhance our performance moving forward. We're becoming smarter about our strategies and have the right people dedicated to this effort.

Great. Thank you very much.

Thank you.

The next question comes from Dennis Geiger with UBS. Please go ahead.

Great. Thanks, guys. Chris, I wanted to ask a little bit more on sort of some of the customer behaviors that you saw in the quarter in light of some of the macro pressures that you commented on and that the industry is seeing. I know you don't break out the traffic in the food and beverage versus the entertainment piece, but anything on spend. You talked a little bit about days of the week. Any kind of additional breakdown on maybe where, where you're seeing more pressure versus where you're seeing less pressure. If there's anything on that front to touch on.

I want to discuss spending. One trend we've observed in our business, which we mentioned last quarter, is related to lower-income consumers. We've seen more weakness among lower-income consumers compared to those with moderate and high incomes, and we noticed some strengthening in the higher-income segment last quarter. These trends persisted into Q1. As we continue to refine our marketing strategy and better target the right guests with appropriate messaging, we are encouraged by our focus on midweek promotions, which has helped us recapture some lower-income consumers. These guests have returned to Dave & Buster's, and as they engage with us, many are joining our loyalty platform, showing higher engagement rates. This reflects the effectiveness of our current efforts and our strategic approach to understanding where issues arise and delivering targeted messages at the right time. While we still have a long way to go to achieve our goals, this indicates that things are heading in the right direction.

That's very helpful. And maybe just one more following up on the promotional side of things that you touch on there, which sounds encouraging. Just on the food promo, if there's anything more to add there on what you saw in the quarter relative to your expectations? What you attribute that to? And then what that means, maybe on the go forward you just mentioned kind of the midweek promos which, which sound encouraging. Anything more on promos going forward at a high level on how you're thinking about that? Thank you.

I believe you will see us continue through the testing and learning phase, refining our approach, and being very specific in how we conduct our business. Given the success we experienced in the middle of the week, we will keep our focus there. We are currently running the Half Off food promotion, which is not intended to be a long-term strategy, but we will maintain it in the short term as we believe it still has potential. We are pleased with the results from our All-You-Can-Eat wings and the ongoing Half Off games promotion on Wednesdays. Our strategy for driving demand during off-peak times is proving effective. Regarding other promotions, we will be judicious in our actions. We have partnerships that I mentioned earlier that we are excited about, and we believe they will provide us with a boost in the summer and into the fall. It will be an ongoing effort to balance the right promotions, partnerships, and pricing strategies.

Appreciate it. Thanks, Chris.

Yep. Thank you.

The next question comes from Brian Vaccaro with Raymond James. Please go ahead.

Hi. Thanks and good evening. You noted the improvement that you've seen the last several weeks after the first quarter came in below expectations. I guess in the spirit of level-setting trends and reasonable expectations, could you provide some more color on the comps that you saw sort of moving through the first quarter? And how the quarter-to-date trending, or what a reasonable expectation would be as it relates to the second quarter? Could we see comps get back to flat if not positive? Just trying to level set expectations a bit.

Yes. It's Mike here. When you think about what we were experiencing coming into the beginning of, I'll say the calendar year. January and February were tougher comps on the year-over-year basis. You had the weather that we saw in January. So the beginning of the calendar year started off slow for us and everybody else. As we got into January, February, we kept still seeing that lower income, that 75,000 and below customers still being challenged. That's not news to anybody. You've heard that on the news more so for the last at least four to three to four months that we've seen. So sales in that period from January, February into March were choppy as we said on the call. Spring break this year was a much more shorter period. So it did cause a little bit of what I call either a mismatch or just a shorter period, which meant it was more condensed. So we didn't get a real benefit of a prolonged spring break where more activities would have taken place over that more prolonged period. But as we've moved out of that and got into, call it the end of April into May timeframe, we've seen considerable improvement in the traffic numbers. The promotions of, like what we talked about, Half Off food has helped drive in. The largest increase from a cohort perspective came in from that under $75,000 a year consumer. So that was an opportunity that we kind of continue to see and keeping that offer out there for a week day basis. And so at this point in time, we're kind of seeing that low single-digit negative comp right now, but we do see that trend getting better as we get more into the summer months at this point.

All right. That's very helpful. Thank you, Mike. And on the marketing front, could you just level set what was your ad spend in the first quarter? And what level of spend do you contemplate all things today, kind of in 2024 compared to the, I think it was $65 million or $70 million you spent in 2023. Thank you.

Yes, I would say that part of the lean in or a little bit more heavier spend in Q1, we had three larger events that we kind of got ourselves behind on, or at least put the muscle effort into. The biggest one being around the spring break and the season, and I should say the spring break pass, which that's the test that we alluded to in our costs of just not being as successful as we were hoping for. But we do see the marketing spend as we get further into the year to be more normalized across Q2, Q3, and Q4. It just was a little bit more heavy in Q1 that we had normally would have spent because of that, as well as helping the promotion of the Half Off food offer, which was really more about driving awareness and bringing customers into the building to experience the new food and new service menu or new service model.

I can provide more details on some of our comments. During the quarter, there were successes as well as challenges. Specifically, in Q1, we were not satisfied with our labor performance and marketing expenditure. Labor issues arose with the rollout of our new food and service model, along with the implementation of various systems, which caused some temporary setbacks. The positive aspect is that we quickly realigned our labor to meet expectations, and performance stabilized throughout May and into June. This was a temporary issue that we've addressed. Our team will always communicate openly when things are going well and when they aren't. On the marketing side, the spring break campaign referenced earlier was a mistake made before our new CMO arrived. I take responsibility as the CEO, but it did not achieve the intended results. It was poorly designed, had an unreasonably high price point, and a very limited timeframe, resulting in a $6 million spend with minimal return. We've learned from this and will avoid repeating such mistakes. In reviewing our quarter, we've quantified that impact to help you better understand our overall financial performance; there's over $10 million in expectations we do not foresee occurring, and we are managing the business with these lessons in mind for the future.

That's a helpful color. Thank you. I'll pass it along.

All right. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Chris Morris for any closing remarks.

All right. Thank you, operator. We continue to see a tremendous amount of upside in this business, and based on what we're seeing in terms of leading indicators of success, are very optimistic that the financial inflection point we have been driving towards is quickly approaching. Thank you all for joining. We look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.