Arcade company Dave & Buster’s (NASDAQ: PLAY) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 10.8% year on year to $534.5 million. Its non-GAAP profit of $0.69 per share was in line with analysts’ consensus estimates. The stock trades at $16.00 in the premarket, 1.17% down from yesterday’s close.
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Dave & Buster's (PLAY) Q4 CY2024 Highlights:
- Revenue: $534.5 million vs analyst estimates of $545.4 million (10.8% year-on-year decline, 2% miss)
- Adjusted EPS: $0.69 vs analyst estimates of $0.69 (in line)
- Adjusted EBITDA: $127.2 million vs analyst estimates of $128.3 million (23.8% margin, 0.9% miss)
- Operating Margin: 8.3%, down from 15% in the same quarter last year
- Free Cash Flow was $108.9 million, up from -$25.4 million in the same quarter last year
- Same-Store Sales fell 9.4% year on year (-4.4% in the same quarter last year)
- Market Capitalization: $623.4 million
Management tried to strike a candid yet optimistic tone on Dave & Buster’s Q4 earnings call, acknowledging disappointing results while laying blame squarely on strategic missteps made by prior leadership. Interim CEO Kevin Sheehan stated that past changes to marketing, menu design, operations, and store remodels “overwhelmed our customers and our operators.” In response, the team has pivoted back to what Sheehan calls a “back to basics” approach, reversing many of the initiatives that derailed momentum and implementing high-confidence, low-risk improvements.
Looking ahead, management painted a brighter picture. Sheehan pointed to “markedly better” results in March and April, driven by higher foot traffic and better performance in food and beverage sales. While no formal financial guidance was provided, the company expressed confidence that recent improvements and ongoing changes would deliver sustained top-line and cash flow recovery in the coming months.
Play Q4 2024 Earnings Call: Our Key Takeaways
1. Management’s Take On Q4 Performance
Dave & Buster’s Q4 performance fell short of expectations, with a 9.4% drop in same-store sales and a sharp decline in operating margin. However, the call focused less on defending results and more on diagnosing what went wrong—and how management is working to fix it. Executives emphasized that most of the issues were self-inflicted and are now being addressed.
Marketing missteps are being reversed: Sheehan blamed previous leadership for eliminating TV advertising entirely, replacing it with an overly complex mix of digital campaigns and promotions. TV has now returned, and the historically successful “Eat & Play Combo” is back in rotation. Management says early signs suggest a growing mix of checks tied to the promotion.
Menu strategy is shifting back toward high-ticket items: The prior team de-emphasized popular entrée items and over-promoted shareables, leading to check dilution. Management is reintroducing best-selling entrées and redesigning the menu layout to drive better visibility and upselling.
Operations and training are being re-centered: Sheehan described a chaotic operating environment where frequent changes and a lack of training left teams unable to execute effectively. The company is now restoring past training standards, re-engaging operators, and cutting back on unnecessary complexity.
2. Major Business Updates
The company is moving to rework its capital allocation strategy, slow down low-return investments, and re-focus on initiatives with a clearer path to value creation. A more disciplined capital spending plan and selective growth projects are now central to management’s playbook.
Remodel program scaled back and reevaluated: Management criticized earlier remodels as rushed, over-budget, and misaligned with customer needs. Only 16 remodels are planned for 2025, with a new prototype under development. The revised hurdle rate for remodels is now mid- to high-single digits, down from mid-teens.
New game rollout regains priority: For the first time in over two years, the company is investing significantly in its game lineup. The most notable new addition is the “Human Crane”—a life-sized arcade claw machine—which Sheehan claims is showing strong ROI and will expand to 100 stores. Other new games include UFC Challenge, NBA Superstars, and Godzilla VR.
Share repurchases and real estate monetization: The company repurchased $85 million of stock in Q4 and another $24 million early in 2025, reflecting confidence in valuation. It also raised $185 million during 2024 through sale-leasebacks and expects to continue monetizing owned real estate opportunistically.
3. Drivers of Future Performance
Management did not provide formal revenue or profit guidance but outlined several directional expectations for fiscal 2025. These include a reduction in capital expenditures, ongoing investment in new games and stores, and a sharp focus on converting operating cash flow into free cash flow.
Marketing reinvestment and targeted promotions: The company is restoring a 50/50 mix between TV and digital advertising, with plans to ramp up TV further if returns justify it. Promotional focus will remain on proven value offerings like the Eat & Play Combo.
Lower, more disciplined capital spending: Net capital expenditures are expected to total no more than $220 million in fiscal 2025, down sharply from $357 million in 2024. This includes spend on new stores, remodeled locations, and maintenance.
Focus on traffic recovery and utilization: Management acknowledged that daypart utilization remains low, particularly at lunch and late night. The company is testing new concepts such as lunch specials bundled with game cards to boost traffic during underutilized hours.
4. Top Analyst Questions
Andy Barish (Jefferies) asked whether recent sales improvements were due to calendar shifts like spring break. CFO Darin Harper noted that despite unfavorable calendar effects through early April, trends have improved, and upcoming weeks should benefit from timing tailwinds.
Andrew Strelzik (BMO) questioned the cost impact of the “back to basics” strategy. Sheehan stressed that expense levels should remain stable due to smarter marketing spend and leaner execution.
Jake Bartlett (Truist) challenged whether returning to past strategies would be enough to remain competitive long-term. Sheehan conceded that while prior initiatives aimed to build a competitive moat, they strayed too far from the company’s core demographic and lacked testing.
Sharon Zackfia (William Blair) asked if the lower-income consumer was rebounding. Harper said it's too early to tell, but noted that recent marketing changes could help reengage that segment.
Brian Mullan (Piper Sandler) asked if competitors were to blame for weak traffic. Sheehan was blunt: “I’d like to use the excuse, it’s the competitive thing, but it’s not.” He said internal execution was the main issue.
5. What Are We Watching In the Upcoming Quarters
In upcoming quarters, we will be watching (1) whether same-store sales trends continue to improve through spring and summer; (2) how the remodeled locations and new games contribute to traffic and check growth; and (3) the company’s ability to maintain margins while restoring historical marketing and training practices.
Dave & Buster’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
