Good afternoon, and welcome to the Dave & Buster's First Quarter 2025 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Cory Hatton, Head of Entertainment Finance, Investor Relations and Treasurer. Please go ahead.

Thank you, operator, and welcome to everyone on the line. Joining me on today's call are Kevin Sheehan, our Board Chair and Interim CEO; and Darin Harper, our CFO. After our prepared remarks, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment, Inc. and is copyrighted. Before we begin the discussion on our company's first quarter 2025 results, I'd like to call your attention to the fact that in our prepared remarks and 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 these risks and uncertainties have been published in our filings with the SEC which are available on our website. In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP measure contained in our earnings release this afternoon. And with that, let me turn the call over to Kevin.

Thank you, Cory. Good afternoon, everyone, and thank you for being with us today. I'm happy to share that we are making significant strides and our operating results have noticeably improved during the first quarter. Although our performance is still not where we aspire it to be, our back-to-basics strategy is effective and is fostering a substantial recovery in our revenue growth. During the quarter, we addressed several clear missteps and implemented confident changes in marketing, menu, operations, remodels, and games investment. While we are still in the initial stages, we are enhancing our execution daily and have a clear roadmap for further improvements and growth in the business. The leadership team and our Board are more confident than ever that our current initiatives will yield considerably improved revenue, adjusted EBITDA, free cash flow, and shareholder value in the upcoming months. Our financial standing remains robust, and our business model is excellent, yielding high returns on new unit investments, superior store-level economics, disciplined expense management, and substantial operating free cash flow generation. As we've mentioned before, the leadership team and the Board are laser-focused on managing this business to boost both revenue growth and free cash flow. Our team is energized by the opportunities ahead to significantly enhance operational performance and shareholder value. Our results in May were particularly promising, highlighted by a successful Memorial Day weekend that marked the start of summer, and we anticipate that this momentum will carry on. The results in June also show continued improvement, with positive same-store sales reported in 11 of the past 30 days. Allow me to give you an update on our Back to Basics plan and the changes we're implementing to rectify mistakes and improve execution and results. In marketing, we have adjusted our media spending across various channels, returned to television, improved our creative output, and simplified our messaging. We successfully reintroduced our historically popular Eat & Play combo, which has seen encouraging early outcomes. We will keep fine-tuning our marketing strategies and re-engaging with our most effective promotions. Recently, we launched our first-ever Summer Pass, which offers unlimited gameplay and significant food and beverage discounts for our guests. Early feedback has been positive. In operations, we have identified several burdensome factors for our operators, which led to numerous untested or ill-conceived changes in promotions, menu, service, pricing, labor setup, and remodels, all while reducing training and failing to properly engage with store teams. We have significantly scaled back these changes and returned to tried-and-true practices, dedicating time to listen to our operators and their insights. To that end, we are rolling out a strong store manager incentive plan focused on same-store sales growth, which has positively energized the system and boosted morale by empowering our managers as true owners of their business. Our classic Eat & Play combo continues to be a favorite among guests, achieving a double-digit opt-in rate thanks to our strong promotion of this great value. This combo allows customers to sample our menu and try new games, encouraging them to return. We have also addressed pricing issues, improved the menu layout, and are working on a new menu that will reintroduce popular items, which we believe will enhance sales. This menu is set to launch later this year following extensive testing. Our food and beverage sales have improved significantly since April. Regarding remodels, we are nearing completion of 48 remodels and are observing better performance from these units compared to the overall system. Remodel stores have outperformed the system by over 700 basis points in the past three months. We initially launched remodels without adequate prototype testing, operator input, store prioritization, local marketing, or budget control. We are confident in our remodel strategy and are refining the prototype with feedback from operators, prioritizing stores, and tightening budget management. We still have ample opportunity to renovate and enhance our system, and we believe that with proper execution and oversight, we can achieve attractive returns and significant increases in sales and cash flow. For games investment, we are preparing for a stellar summer with our summer games program featuring a leaderboard competition across all Dave & Buster's locations, inviting guests to participate in challenges with five new and existing racing-themed games, including Hot Wheels and NASCAR Pit Stuff, alongside a Grand Prize sweepstakes and monthly giveaways. Additionally, we are introducing new titles like Super Punk and Pac-Man Roller this summer to further enhance our game lineup and solidify our position as America's leading arcade. We have launched the Umanrane in 100 D&B stores, sparking excitement and trial, and we plan to introduce this experience to more locations, including our main event stores. New store development continues to yield solid returns and is a core part of our strategy. In the first quarter, we opened two new stores in Killeen, Texas, and Lansing, Michigan, and in the second quarter, we opened locations in Freehold, New Jersey, and Wilmington, North Carolina. We also successfully relocated our Honolulu store to the premier Ala Moana Mall, which resulted in two weeks of missed sales, but I'm pleased to report that the new location is thriving, achieving the highest weekly sales in the company's history with week one sales exceeding $1 million. With the opening of our first international franchise in India in December, we anticipate at least seven additional international openings in the next year, having secured agreements for over 35 more stores in the coming years. We view international franchising as a strong driver for efficient growth while monetizing our brand globally with minimal investment and risk. As for our ongoing CEO search, the Board of Directors is wrapping up their efforts to select a permanent CEO. I remain fully committed to collaborating closely with the Board and continuing to operate the business effectively to enhance performance beyond the improvements we’ve seen recently. We will provide further updates when we have definitive information to share regarding this matter, which will conclude our comments on this topic for today’s call, given the sensitivity surrounding discussions with candidates. Before I hand the call over to Darin, I want to emphasize to our team both in the field and the support center that we are united and steadfastly focused on not only getting our business back on track but making it better than ever before. We plan to keep demonstrating to you, the investment community, the power of our brands and business model. Stay tuned as we continue our journey to unlock the full potential of this great company. Now, I will turn it over to Darin for a review of our financial results for the first quarter.

Thank you, Kevin, and good afternoon, everyone. Turning to a more detailed review of our financials. In our first quarter of fiscal 2025, comp store sales decreased 8.3% versus the prior year period. As Kevin mentioned, the first quarter was weighed down by a very soft February with comps down 11.9%. However, March saw an initial improvement with comps down 8.4%, followed by April with comps down 4.3% to exit the quarter. Furthermore, through the first 5 weeks of the second quarter, we are seeing further sequential improvement with comps down 2.2%. We believe this sequential improvement reflects the impact of the various initiatives we've been focused on this year and there remains a lot of work ahead. During the quarter, we generated revenue of $568 million, net income of $22 million or $0.62 per diluted share, adjusted net income of $27 million or $0.76 per diluted share and adjusted EBITDA of $136 million, resulting in an adjusted EBITDA margin of 24%. As a reminder, reconciliations of all non-GAAP financial measures can be found in today's press release. A quick callout on the attribution of our adjusted EBITDA decline in the quarter versus the prior year period. With the cadence of our new store openings in late Q1 and early Q2, including our Hawaii relocation, we incurred a $2.7 million increase in preopening expenses versus the prior year. We generated $96 million in operating cash flow during the first quarter, ending the quarter with $12 million in cash and $411 million of availability under our $650 million revolving credit facility, net of $14 million in outstanding letters of credit. We ended the quarter with a total net leverage ratio of 3.1x as defined under our credit agreement. In the first quarter, we invested a total of $115 million in capital additions on a gross basis or $110 million on a net basis when factoring in payments from landlords. As we mentioned to you before, we are focused on converting our significant operating cash flow to free cash flow through more strict management of capital spend, eliminating ineffective and inefficient spending. We are committed to demonstrating our ability to generate free cash flow while continuing to invest in double-digit new store growth, new games, other high ROI initiatives and a more diligent remodel program. We reiterate our previously provided expectations for certain key cash flow items that are readily in our control in fiscal 2025, which ends on February 3, 2026. We continue to expect total capital expenditures to not exceed $220 million. This includes spending on net new store capital, remodels and other initiatives, games capital and maintenance capital. We further expect preopening expense of approximately $20 million and interest expense within the range of $130 million to $140 million for fiscal 2025. We are firmly committed to our high ROI and historically successful new store strategy with the opening of 2 new Dave & Buster's in the first quarter, one in Killeen, Texas and the other in Lansing, Michigan, both opening in the final weeks of the first quarter and 1 store relocation in Honolulu, Hawaii. As Kevin mentioned, quarter-to-date, we have opened 2 additional Dave & Buster's stores in Freehold, New Jersey and Wilmington, North Carolina, and we continue to expect a total of 10 to 12 new store openings in fiscal 2025. In relation to our new store growth strategy and expectations for net new store capital in fiscal 2025, we have 9 owned real estate assets today at varying stages of development, ranging from open and operating stores to recently acquired land for future stores at attractive sites. We are in active discussions with potential partners to monetize this real estate to more efficiently fund our store development and manage our cash flows more efficiently. And with that, operator, please open the line for questions.

Our first question today comes from Andy Barish with Jefferies.

Just wondering if at this stage, you're able to have some degree of predictability in terms of the trajectory of the same-store sales in the business, maybe how you're looking at it on a multi-year stack basis or anything like that, that may be helpful for us to try to project the rest of the year and what's been kind of a difficult or moving target.

And I think you've just got to be a little fair as we're coming out of where we've been in the last couple of years. As we see it, we've got a load of opportunity here to drive top line sales. And you've heard me use the analogy many times in sports, we're in the second or third inning or in the beginning of the second quarter of a basketball game. We've got a long way to go. So getting the business fixed and to the right cadence is job one. And that's going to look like some outsized growth as we go through the next couple of years. But over the long term, what I've communicated to our team is this is a business should grow in the 3% kind of same-store sales with another percent or so on new stores. And then it beholds us to get another percent on incremental opportunities by expanding internationally, selling apparel that we're starting to sell on the website, having a catering operation that we're starting now as well. So lots of little side things that we could do. And then you take that growth in the revenues and then you discipline that with lean management and best-in-class cost controls to drive a much higher conversion to EBITDA. And then you manage your cash effectively, as Darin was talking about, very smartly. We need to first prove to you guys that there's a powerful amount of cash generation in this business, and we will do that this year. And then you guys will start to see that we're taking that cash flow and intellectually managing it to drive shareholder value. We're in this for one purpose and it is to drive the share price to heights it's never seen and should have been all along.

Okay. Darin, it seems that your capital expenditures are heavily concentrated at the beginning of the year, with half of your total CapEx already spent in the first quarter. It appears that most of the planned remodels for this year have been completed. Can you provide some insight into what that total expenditure looks like? I assume there was some initial spending on arenas and social bays, so I’m looking for a breakdown of what the CapEx consists of without having read the quarterly results yet.

Yes. Yes, that's right, Andy. Yes, very front-end loaded, as you mentioned, and that was right in line with expectations because we had a lot of new stores coming online within Q4 and Q1. Number one, yes, we were sort of on the tail end of some more significant spending on the remodel side. And then we had a fair amount of capital with respect to games that supported our spring break games and heading into summer of games. But yes, of the $115 million gross spend, $53 million of that was related to new stores, about $20 million for remodels and other initiatives, $30 million on games and about $12.5 million on maintenance CapEx. So look, we remain confident. Obviously, we reiterated our full year guidance. And I feel like that continues to be a good number for us to support everything that we need to do. Obviously, inherent in that is our ongoing sale-leaseback transactions with key partners that we feel very, very good about. And that's how we continue to see the balance of the year.

The next question is from Jeff Farmer with Gordon Haskett.

Just drilling down on the improved same-store sales trend. Can you share anything in terms of what that's looked like across things like dayparts, week parts, young adults, families, geographies? Anything that sort of paints a little bit broader picture in terms of what you guys are seeing on the improved trend?

Yes. Yes, I'll take that. Yes. So we're really encouraged from where we're seeing the improvement. Number one, it's predominantly driven by improvement in traffic. And we're seeing that benefit entertainment and F&B both. Furthermore, we're seeing some nice check growth on the F&B side, and that's not through taking price, but it's through higher attachment coming from our Eat & Play combo that we've been promoting. And as Kevin has said, we've seen double-digit opt-in for that, which is great. We are discounting less. And our operators are hyper-focused on our peak hours right now in driving better F&B growth through speed of service through server suggestions, et cetera. Furthermore, what we're really encouraged with is the strength that we're seeing on our weekends really throughout this calendar year; our weekend growth has far outpaced our weekday. And we're really encouraged by that because that's really focused on us driving a lot of this awareness, our media strategy through our messaging through our offer and it's driving people in at these key peak times. We are seeing in the credit card data. It does appear as if some of the higher income is trading better a bit of a trade down that we think we'll be in the beneficiaries of. But the net middle consumer is performing really well also. So just a bit of color there that hopefully gives you a little bit of perspective on where we're seeing this improvement. Go ahead.

Another just your point is spot on because this is an area of importance to me. As we look to regain some of our revenue in the late night dayparts and we're testing things with lunches. And we're trying to push business into these underutilized time periods of the week and that is going to remain a focus. But of course, as Darin pointed out, getting it right in the important peak periods is also extremely important. But we feel we have a good opportunity to push the time periods that were busy further and further out.

And then just one quick follow-up. Kevin, you mentioned a new store manager incentive program. Can you provide us with an update on its status and how it has evolved?

I believe we now have a top-notch GM program that offers a competitive salary and a strong bonus structure based on achieving specific metrics. We also have a long-term incentive designed to retain our current managers and attract high-quality candidates. This incentive operates on a rolling three-year basis, where each year, rewards are linked to same-store sales. It begins with positive same-store sales, and the higher the sales, the greater the reward. This amount is accrued and paid out over three years, with the first year's payment made immediately. In the second year, you receive payments for one-third of the second year's incentive and one-third of the first year's incentive, while also accruing for the second year, which then continues into the third and fourth years. Essentially, over a three-year period, you can earn significant payouts by focusing on driving same-store sales, engaging with the community, and promoting events. We aim to encourage managers to adopt a more CEO-like mentality, moving beyond the basic responsibilities and elevating the business to a much higher standard.

The next question is from Andrew Strelzik with BMO.

My first one on the improvement in the comp trends, are you able to identify or unpack which of the initiatives that you've implemented have really been the biggest contributors that you saw kind of a step function, whether it's the marketing side or the upside? And then when you talked about having a very clear road map moving forward over the next 3 or 6 months, what are some of the biggest opportunities that you think still remain?

Yes, regarding your question, we are very encouraged by the improvement in traffic. This is supported by our brand tracking work, which shows that our guests are becoming more aware of our promotions and media, positively affecting their perception. We are seeing consumer metrics that align well with this traffic trend. Additionally, initiatives like the Eat & Play Combo have been successful in driving up food check, and we are very satisfied with that. We feel confident that, although we are still in the early stages of this process, we are gaining positive momentum. In terms of future opportunities, we are still developing these strategies and see potential for better marketing optimization, messaging improvements, and refining our product mix. On the gaming side, there’s more we can do to cater to our guests' preferences, particularly by pivoting from previous entertainment concepts towards what they truly want. There is significant potential for operational improvements, and we are well-positioned to maintain this momentum as we progress through the year.

Okay. And maybe my follow-up. Over the last couple of years, there were a lot of costs that were either optimized or taken out of the business. Is there any sense as you do this work that you might need to reinvest in the business to kind of drive that long-term performance or any areas specifically where you feel like you need to lean in from an investment perspective?

I don't think there's anything particularly extraordinary. We're going to benefit now from spending our money more wisely. As mentioned earlier, the funds previously allocated to arenas and similar expenses will now be directed towards initiatives that we will test to ensure our guests appreciate, and then we'll implement them more efficiently than in the past. I don’t foresee any issues there. I believe once we start generating the revenue we expect, we should see improvements, especially in the second and third quarters. Strong same-store sales can address many concerns, allowing us to refocus on growing the business. Additionally, Darin and I prioritize lean management, striving for best-in-class execution. Tony, who oversees operations, is always mindful of labor management while ensuring we offer a great experience for our guests so they return. This is all part of our efforts, including remodels, to drive traffic back. We’ve been quiet for quite some time, but as Aaron pointed out, we are re-engaging in marketing. Previously, we were targeting digital audiences without achieving the necessary reach and frequency, but we're learning how to improve our strategies now. Our marketing efforts still have a long way to go, but we're heading in the right direction. I'm optimistic because with each new marketing initiative, we realize we have room to grow beyond our original expectations. So, there are numerous opportunities, and I'm excited about what's ahead. I believe our costs will become more justifiable as long as we achieve favorable same-store sales, and we're all quite confident in that.

Next question is from Todd Brooks with the Benchmark Company.

Two for me as well. First, on the gaming floor, and the newness that's been flowed in over the course of this year, where do we stand for a number of new cabinets after whatever has been flowed in for summer games? And then, what's the outlook exiting the year and there was kind of an earlier discussion that there were a couple of years where we didn't touch the game floor. So can we walk through the cadence of how you get the game floor back to the right balance and newness over the next quarters here?

Sure, I can start with that. We are rolling out a total of eight new cabinets along with two new attractions, which are the human crane and cotton candy. Including these two, we have about ten per location, which is quite consistent with the brand's performance before COVID. We are optimistic about this. The new Hot Wheels game has strong appeal with our guests, and we have secured exclusivity, allowing us to form a beneficial partnership with Mattel. We've introduced sweepstakes that enable consumers to win a new car using our new leaderboard concept, generating significant excitement and positive engagement. This provides perspective on what we've implemented. Looking ahead, we've gained valuable insights from our remodel program, emphasizing the importance of creating the right entertainment experiences tailored to guest occasions and fitting within the Power Card ecosystem, which drives demand. We are actively collaborating with our partners to identify the right types of attractions that resonate with our guests, enhancing their experience by encouraging more interaction and gamification within their groups. We are excited about the many initiatives we are working on and look forward to sharing more in the coming months.

Okay. Great. And then if we're just looking at the same-store sales result for the quarter, I know there's a lot of moving pieces, and you said you were encouraged by the fact that it was predominantly traffic driven the recent momentum. But can you give us any color looking back to Q1 of kind of a traffic check type of split to understand any sort of pricing changes that were made that might have impacted average check? Or just any sort of nuances that could add some more color to the same-store sales result that was reported?

Yes, sure. We historically do not provide any specific details on traffic versus check. But I'd say when you look at the predominant impacts on that sales trend, most of that is coming from traffic. Going back, there was no discrete pricing that we took during the quarter. We did moderate some of the discounting or perhaps said differently, we did not get as aggressive with discounting as the brand did last year. So for instance, we're rolling over 50% off food from the prior year. And obviously, we're now leaning into our summer games campaign rather than 50% off food. That's going to be accretive to our F&B check. And so that's a portion of the story. But the majority is driven by just an improvement in traffic.

The next question is from Dennis Geiger with UBS.

I wanted to first ask, from here, a lot of compelling initiatives to improve the trajectory. Just as we think about some of the ongoing challenges, Kevin, maybe framing up how you think about sort of macro as a headwind right now versus some of those brand specific or self-inflicted issues that you're clearly improving but that maybe just take a little bit of time to work through. Is it more the latter than sort of the macro that you were in, in your view as far as some of the lingering pressure that's still out there as you work through the fixes?

I think the work on the fixes is going to take us through a good portion of the year as we roll through this quarter. We're still benefiting from that, and we will continue to. And we're starting to make new initiatives that are driving value. And I think what happens for us because we've got so much power behind the business right now that you lose the impact to the economic landscape. We're aware of it, but because there's just so many things that we're working on that we feel pretty confident we'll ride through this period and hopefully, come out the other side a much stronger company and doing, I would say, better than most in the industry because of the effort we're making to make up for the past. I don't know if I answered that well, but...

No, that makes sense. Regarding your comments about moving through the current situation, you mentioned potentially achieving 3% same-store sales growth long-term. I may have misunderstood, but did you say there could be an additional 1% growth from new stores? Could you clarify your comments on new stores and what their long-term prospects look like?

Yes, ultimately this is Kevin Zhang with my team, and I believe we should strive to be the best in our class. If we adopt an ownership mentality, as the new General Managers program encourages, we should aim to achieve same-store sales growth of around 3%. Frankly, those implementing the programs often perform even better than that. We're encouraging the right behaviors, which will form the foundation of our business. Additionally, we expect new stores to contribute growth, which I estimate will be between 1% and 2% as we expand. As a management team, it is our responsibility to consider how to strengthen our relationships and enhance our business offerings based on the value of both the Dave & Buster's and Main Event brands. I'm also focused on international expansion and other undisclosed initiatives that will help us increase our revenue opportunities. This process involves rallying everyone around the key metrics that are significant to me, the leadership, and the Board. I reminded the team that with the number of outstanding shares we have, $350,000 corresponds to just $0.01 in earnings per share. When we frame it that way, people realize they can have an impact, and that's the mindset we want to instill—everyone needs to start thinking like owners of the business.

The next question is from Brian Mullan with Piper Sandler.

Just a question on the game side. On the last call, you referenced, I think, the value proposition for the consumer, perhaps testing some things that could extend the time of play. Can you just talk about those tests? Anything you've learned so far, what you're measuring and looking to see and how you'd expect that to progress?

Yes. Yes, absolutely. So a couple of things that we're doing there. One, as we think about this Eat & Play Combo, one of the things that we added to it this year for the first time in the brand is an all-you-can-play option. And that is of all of our Eat & Play combos. We've got 30% of folks upgrading to that all-you-can-play option. And so it's very clear in our consumer research and feedback that we're getting is that guests like the ability to know, hey, I can spend this much and have a known quantity of time of which to play. So that's one aspect. But probably the bigger thing that we are in a couple of phases of testing is on our kiosks, and that's testing a more simplified rate card structure for our guests. I think we all agree that last year, we kind of made it a little too confusing for the guests. So we're trying to simplify it and bring back the right flow for the guest in terms of initial pricing and supercharges, et cetera. But along with that is testing bringing our game pricing down to extend the amount of time that they're in the midway. That was something that we believe we might have overextended a little bit last year. And that's an area where, again, we're focused on getting the same amount, if not more, from our guests, but giving them better value through the right game play. And so we're being very strategic with how we price redemption versus non-redemption games to really give them the best experience possible while managing our margins in the right way. So early days in that test, but we're pretty excited about the learnings that we've gotten so far.

Okay. And then on the food side, on this call, you've talked about seeing some average check lift from Eat and Play, which is great. I wanted to ask about just separately. I think you've talked about making some changes to the menu design or configuration. Have you taken any actions on that so far? Is that something you're still working on if you have, how has the consumer response been?

Yes, it's very important. When we started, we realized the menu wasn't aligned with what our guests wanted. So we revamped the existing menu to highlight the opportunities that we believe our guests are looking for, and this has positively impacted our ticket sales. This was the first part and we were able to implement it quickly. The second part is more of an evolution. We want to approach it carefully and get it right the first time. We're bringing back the most successful menu items from Dave & Buster's history, showcasing those entrees, beverages, and desserts with appealing visuals to make the menu enticing. We're also testing different versions over the next few weeks and will learn from that to retest if necessary, aiming to roll out the new menu in the fall when business tends to pick up. We intend to take a measured approach and have gathered input from our operators throughout the process to ensure they feel involved. We want to avoid adding unnecessary complexity in the dining experience and the kitchen, so we are committed to doing this correctly and effectively from the start.

Next question is from Jake Bartlett with Truth Securities.

I wanted to start with a clarification regarding your question about unit growth. It's a significant difference to consider growth of 1% to 2% compared to the 5% to 6% growth we've seen recently and that is guiding us this year. So, are you indicating that you're rethinking the unit growth direction of the business and putting more emphasis on same-store sales and free cash flow generation? I want to ensure that I understand correctly, as this seems like a substantial change if that is indeed what you're trying to convey. I also have a couple of follow-up questions.

Yes, Jake, Darin. Yes, I'm glad you asked that question, yes. I think Kevin was kind of providing just sort of a high-level summary view sort of internally. But no, we still plan on 10 to 14 new units a year for the foreseeable future, which obviously is a much higher percentage. So no, please don't remit to that comment as a change in strategy and capital allocation with respect to new stores.

Great, I really appreciate that. My other question is about what we should expect in the next month or two. The performance in May was really strong and impressive, and I want to understand better what is happening in June and July. The new games that were mentioned have been in place for the last five weeks, so they are already included. I think the summer of games marketing will start soon, but I'm interested in what changes might occur that could potentially drive improvement from here.

Yes, our game rollout was staged between spring break and summer, and it is now fully implemented. We are finalizing the rollout of the human crane and activating it in 100 Dave & Buster's locations, which is a key part of our strategy. We also launched our Summer Pass program about three weeks ago, and early indications are positive as a segment of our consumers have shown strong interest in this pass model. We are pleased with its initial performance. Additionally, we are introducing a new leaderboard across Dave & Buster's, linked to some of the new games, particularly the Hot Wheels game we are now promoting. Players will have a chance to enter a drawing based on their high scores for prizes, including first, second, and third place rewards at various locations. This campaign is currently generating a very strong response, and we are excited about it. We will continue to enhance that momentum while optimizing our media spending. As previously mentioned, we have also introduced a new incentive model for our team, focusing them on a hospitality approach and a separate incentive plan aimed at boosting food sales during this time. We are concentrating on various initiatives that will enhance what we’ve implemented while also allowing us the opportunity to develop plans for next year.

The next question is from Brian Vaccaro with Raymond James.

I have two quick questions regarding margins. First, in the first quarter, we experienced sales deleverage affecting margins. Can you provide more details on the other operational expense line? Are you anticipating that the higher advertising and potentially increased R&D will persist into the second quarter or throughout the rest of the year?

So part of that increase is some incremental marketing spend that we had in the period as well. So we had about $4.7 million incremental marketing spend to help drive and promote these initiatives. So you do have that. And you've got the - we do have some incremental R&M spend as well that was anticipated. A lot of that is focused on our game room floor to really drive and make sure that with the introduction of all these new games, we've got the games working. We've got things refreshed in the right way. And so there's an element of that in that cost as well. And so I'd say, look, we don't anticipate the cadence of marketing to continue at that base for the year. But some lines with R&M, we are sort of anticipating a little bit more spend this year versus the prior year. We feel like that's the right investment for us to drive our growth and get us to top line positivity.

All right. And then if I could just follow up on just the comps themselves and the trajectory here. Any color on walk-in versus your events business? I know there's been some investments in new SaaS and team members to lead to special events business. So any color there? And then any color differences between Dave & Buster's and Main Event because I think a lot of these initiatives are focused on Dave & Buster's. So any differences worth noting there?

Yes, sure. Yes. Overall, we've seen from a special event side, some good performance there that's outpaced our walk-in for the year, it's up slightly year-over-year. Overall, I'd say on balance, D&B Main Event are continuing to perform similarly. But there are elements of areas that we're focusing on D&B that we're seeing some metrics, which, again, give us further confidence on the things that we're really focused on are driving the business forward. We are seeing some even greener shoots on aspects of the D&B business. But overall, nothing extraordinarily notable to call out.

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

Thank you, operator, and thank you all for joining. In closing, our back-to-basic strategy is working, and we are driving a material recovery in our top line trajectory. We are seeing in real time that our compelling product offering and value proposition are driving renewed interest from our loyal guests and new guests this summer. We have a very strong business model with exceptional brand awareness, high guest satisfaction and affinity, national scale, high returns on new units, best-in-class unit economics disciplined cost management and strong free cash flow. Our leadership team, our operators and our Board are fully focused on driving revenue growth and free cash flow. We're excited about the opportunities ahead to enhance performance and increase shareholder value. We look forward to speaking with you again soon, and have a great evening. Thank you.

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