Dave & Buster's Entertainment, Inc 10-Q for FY2024 Q2

Dave & Buster's Entertainment, Inc. (PLAY)

10-Q 2023-09-06 For: 2023-07-30

Added on April 12, 2026

About this 10-Q

Dave & Buster's Entertainment, Inc filed this 10-Q on September 6, 2023, covering the quarter ended July 30, 2023 (FY2024 Q2).

Headline figures

Quarter ended July 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $542.1M; up 15.7% from $468.4M a year earlier
Diluted EPS: $0.60; up 1.7% from $0.59 a year earlier

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Delaware			35-2382255
(State of Incorporation)			(I.R.S. Employer ID)

1221 S. Beltline Rd., Suite 500, Coppell, Texas, 75019			(214)357-9588
(Address of principal executive offices) (Zip Code)			(Registrant’s telephone number)


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities	31
Item 6.	Exhibits	32
	Signatures	33


	July 30, 2023		January 29, 2023
	(Unaudited)		(Audited)
ASSETS
Current Assets:
Cash and cash equivalents	$	82.6	$	181.6
Inventories	43.7		45.4
Prepaid expenses	25.1		19.5
Income taxes receivable	33.2		25.5
Accounts receivable	23.4		21.7
Total current assets	208.0		293.7
Property and equipment (net of $1,130.2 and $1,043.7 of accumulated depreciation as of July 30, 2023 and January 29, 2023, respectively)	1,221.7		1,180.2
Operating lease right of use assets, net	1,352.7		1,333.6

Tradenames	178.2		178.2
Goodwill	742.5		744.5
Other assets and deferred charges	26.3		30.8
Total assets	$	3,729.4	$	3,761.0
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current installments of long-term debt	$	9.0	$	8.5
Accounts payable	69.6		84.7
Accrued liabilities	340.8		342.9
Income taxes payable	3.1		1.9
Total current liabilities	422.5		438.0
Deferred income taxes	83.5		66.3
Operating lease liabilities	1,586.8		1,567.8
Other liabilities	43.5		55.7
Long-term debt, net	1,278.7		1,222.7
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.01; authorized: 400.00 shares; issued: 62.69 shares at July 30, 2023 and 62.42 at January 29, 2023; outstanding: 42.97 shares at July 30, 2023 and 48.41 at January 29, 2023	0.6		0.6
Preferred stock, 50.00 authorized; none issued	—		—
Paid-in capital	590.1		577.5
Treasury stock, 19.72 and 14.01 shares as of July 30, 2023 and January 29, 2023, respectively	(843.8)		(639.0)
Accumulated other comprehensive loss	(0.8)		(0.9)
Retained earnings	568.3		472.3
Total stockholders’ equity	314.4		410.5
Total liabilities and stockholders’ equity	$	3,729.4	$	3,761.0


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
Entertainment revenues	$	360.8	$	311.4	$	753.9	$	610.6
Food and beverage revenues	181.3		157.0		385.5		308.9
Total revenues	542.1		468.4		1,139.4		919.5
Cost of entertainment	34.4		29.1		68.7		55.9
Cost of food and beverage	49.2		46.5		105.2		89.7
Total cost of products	83.6		75.6		173.9		145.6
Operating payroll and benefits	127.0		113.6		257.6		207.0
Other store operating expenses	169.1		142.5		339.1		266.9
General and administrative expenses	32.2		37.7		63.6		66.0
Depreciation and amortization expenses	49.1		38.6		98.0		71.9
Pre-opening costs	4.0		3.9		8.7		6.9
Total operating costs	465.0		411.9		940.9		764.3
Operating income	77.1		56.5		198.5		155.2
Interest expense, net	32.9		17.1		63.6		28.5
Loss on debt refinancing	11.2		1.5		11.2		1.5
Income before provision for income taxes	33.0		37.9		123.7		125.2
Provision for income taxes	7.1		8.8		27.7		29.1
Net income	25.9		29.1		96.0		96.1
Unrealized foreign currency translation gain	0.1		—		0.1		—
Unrealized gain on derivatives, net of tax	—		1.4		—		2.7
Total other comprehensive gain	0.1		1.4		0.1		2.7
Total comprehensive income	$	26.0	$	30.5	$	96.1	$	98.8
Net income per share:
Basic	$	0.60	$	0.60	$	2.11	$	1.97
Diluted	$	0.60	$	0.59	$	2.09	$	1.95
Weighted average shares used in per share calculations:
Basic	43.01		48.83		45.47		48.71
Diluted	43.38		49.27		45.83		49.36


	Twenty-Six Weeks Ended July 30, 2023
	Common Stock			Paid-In Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Shares	Amt.				Shares	Amt.
Balance January 29, 2023	62.42	$	0.6	$	577.5	14.01	$	(639.0)	$	(0.9)	$	472.3	$	410.5
Net income	—	—		—		—	—		—		70.1		70.1

Share-based compensation	—	—		6.7		—	—		—		—		6.7
Issuance of common stock	0.09	—		0.1		—	—		—		—		0.1
Repurchase of common stock	—	—		—		3.62	(127.5)		—		—		(127.5)
Balance April 30, 2023	62.51	$	0.6	$	584.3	17.63	$	(766.5)	$	(0.9)	$	542.4	$	359.9
Net income	—	—		—		—	—		—		25.9		25.9
Unrealized foreign currency translation gain	—	—		—		—	—		0.1		—		0.1
Share-based compensation	—	—		5.2		—	—		—		—		5.2
Issuance of common stock	0.18	—		0.6		—	—		—		—		0.6
Repurchase of common stock	—	—		—		2.09	(77.3)		—		—		(77.3)
Balance July 30, 2023	62.69	$	0.6	$	590.1	19.72	$	(843.8)	$	(0.8)	$	568.3	$	314.4


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Twenty-Six Weeks Ended July 31, 2022
	Common Stock			Paid-In Capital		Treasury Stock At Cost			Accumulated Other Comprehensive Loss		Retained Earnings		Total
	Shares	Amt.				Shares	Amt.
Balance January 30, 2022	61.56	$	0.6	$	548.8	13.07	$	(605.4)	$	(3.6)	$	335.1	$	275.5
Net income	—	—		—		—	—		—		67.0		67.0

Derivatives, net of tax	—	—		—		—	—		1.3		—		1.3
Share-based compensation	—	—		3.6		—	—		—		—		3.6
Issuance of common stock	0.25	—		5.6		—	—		—		—		5.6
Repurchase of common stock	—	—		—		0.03	(1.2)		—		—		(1.2)
Balance May 1, 2022	61.81	$	0.6	$	558.0	13.10	$	(606.6)	$	(2.3)	$	402.1	$	351.8
Net income	—	—		—		—	—		—		29.1		29.1

Derivatives, net of tax	—	—		—		—	—		1.4		—		1.4
Share-based compensation	—	—		4.7		—	—		—		—		4.7
Issuance of common stock	0.40	—		—		—	—		—		—		—
Repurchase of common stock	—	—		—		0.89	(30.6)		—		—		(30.6)
Balance July 31, 2022	62.21	$	0.6	$	562.7	13.99	$	(637.2)	$	(0.9)	$	431.2	$	356.4


	Twenty-Six Weeks Ended July 30, 2023		Twenty-Six Weeks Ended July 31, 2022
Cash flows from operating activities:
Net income	$	96.0	$	96.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	98.0		71.9
Non-cash interest expense	6.0		3.8
Deferred taxes	16.3		18.9
Loss on debt refinancing	11.2		1.5
Share-based compensation	11.9		8.3
Other, net	5.9		5.1
Changes in assets and liabilities, net of assets and liabilities acquired:
Inventories	1.7		(1.7)
Prepaid expenses	(5.6)		(3.9)
Income tax receivable	(7.7)		30.2
Accounts receivable	(1.6)		(2.3)
Other assets and deferred charges	3.5		0.9
Accounts payable	(23.5)		(20.3)
Accrued liabilities	(18.5)		26.9
Income taxes payable	1.2		0.2
Other liabilities	1.4		(2.5)
Net cash provided by operating activities:	196.2		233.1
Cash flows from investing activities:
Capital expenditures	(133.8)		(99.9)
Acquisition of a business, net of cash acquired	—		(822.7)
Proceeds from sales of property and equipment	0.4		0.4
Net cash used in investing activities:	(133.4)		(922.2)
Cash flows from financing activities:
Proceeds from term loan and revolver	87.4		821.5
Term loan and revolver payments	(44.3)		(14.0)
Debt issuance costs	(3.1)		(17.7)
Proceeds from the exercise of stock options	0.7		5.6
Repurchases of common stock under share repurchase program	(200.0)		(25.0)
Repurchases of common stock to satisfy employee withholding tax obligations	(2.5)		(6.8)
Net cash provided by (used in) financing activities:	(161.8)		763.6
Increase (decrease) in cash and cash equivalents	(99.0)		74.5
Beginning cash and cash equivalents	181.6		25.9
Ending cash and cash equivalents	$	82.6	$	100.4
Supplemental disclosures of cash flow information:
Change in fixed asset accounts payable	$	8.4	$	5.2
Cash paid (refund received) for income taxes, net	$	17.8	$	(20.6)
Cash paid for interest, net	$	57.9	$	22.0


	July 30, 2023		January 29, 2023
Revolving credit facility	$	—	—
Term loan	900.6		864.5
Senior secured notes	446.0		441.8
	$	1,346.6	$	1,306.3


	Amount
Gross cash consideration	$	853.2
Contingent consideration (1)	13.8
Less: cash acquired	(34.5)
Total consideration paid	$	832.5
Assets:
Current assets	16.9
Property and equipment	338.3
Operating lease right of use assets	297.2
Tradename	99.2
Other assets and deferred charges	5.8
Liabilities:
Accounts payable	20.1
Current portion of operating lease liabilities	11.6
Accrued liabilities	41.6
Operating lease liabilities	279.2
Deferred tax liabilities	35.8
Other liabilities	6.5
Net assets acquired, excluding goodwill	$	362.6
Goodwill	$	469.9


	Goodwill		Tradename
Balance at January 30, 2022	$	272.6	$	79.0
Acquisition of Main Event (1)	471.9		99.2
Balance at January 29, 2023	$	744.5	$	178.2
Adjustments to Main Event goodwill (1)(2)	(2.0)		—

Balance at July 30, 2023	$	742.5	$	178.2


	July 30, 2023		January 29, 2023
Deferred entertainment revenue	$	119.5	$	114.4
Current portion of operating lease liabilities, net (1)	69.1		64.1
Compensation and benefits	37.9		60.6
Accrued interest	15.7		15.8
Deferred gift card revenue	13.4		16.4
Customer deposits	9.8		8.7
Property taxes	13.2		13.1
Sales and use and other taxes	9.3		10.6
Occupancy and variable rent costs	6.1		9.4
Utilities	7.9		7.2
Current portion of long-term insurance	5.7		6.7
Other	33.2		15.9
Total accrued liabilities	$	340.8	$	342.9


	July 30, 2023		January 29, 2023
Credit facility—revolver	$	—	$	—
Credit facility—term loan	900.0		847.9
Senior secured notes	440.0		440.0
Total debt outstanding	1,340.0		1,287.9
Less current installments of long-term debt	(9.0)		(8.5)
Less issue discounts and debt issuance costs	(52.3)		(56.7)

Long-term debt, net	$	1,278.7	$	1,222.7


	Options		Restricted Stock Units		Total
Outstanding at January 29, 2023	0.98		1.89		2.87
Granted	0.08		0.26		0.34
Exercised	(0.03)		—		(0.03)

RSU vestings	n/a		(0.23)		(0.23)
Forfeited	(0.05)		(0.13)		(0.18)
Outstanding at July 30, 2023	0.98		1.79		2.77
Remaining unrecognized compensation expense	$	4.6	$	39.1	$	43.7


	Thirteen Weeks Ended
	July 30, 2023		July 31, 2022		Change
Total revenues	$	542.1	$	468.4	$	73.7
Total store operating weeks	2,730		2,171		559
Comparable store revenues	$	370.6	$	399.0	$	(28.4)
Comparable store operating weeks	1,833		1,833		—
Noncomparable store revenues—Dave & Buster’s	$	36.3	$	17.6	$	18.7
Noncomparable store operating weeks—Dave & Buster’s	166		78		88
Noncomparable store revenues—Main Event	$	133.7	51.4		$	82.3
Noncomparable store operating weeks—Main Event	731		260		471
Other revenues and deferrals	$	1.5	$	0.4	$	1.1


	Twenty-Six Weeks Ended
	July 30, 2023		July 31, 2022		Change
Total revenues	$	1,139.4	$	919.5	$	219.9
Total store operating weeks	5,374		4,047		1,327
Comparable store revenues	$	797.9	$	844.6	$	(46.7)
Comparable store operating weeks	3,666		3,666		—
Noncomparable store revenues—Dave & Buster’s	$	67.3	$	22.7	$	44.6
Noncomparable store operating weeks—Dave & Buster’s	309		121		188
Noncomparable store revenues—Main Event	272.0		51.4		220.6
Noncomparable store operating weeks—Main Event	1,399		260		1,139
Other revenues and deferrals	$	2.2	$	0.8	$	1.4


	As Of And For The Trailing Four Quarters Ended July 30, 2023
Credit Adjusted EBITDA (a)	$575.4
Total debt (1)	$1,287.7
Less: Cash and cash equivalents	$(82.6)
Add: Outstanding letters of credit	$9.8
Net debt (b)	$1,214.9
Net Total Leverage Ratio (b / a)	2.1	x


Period (1)	Total Number of Shares Repurchased (in millions) (2)	Average Price Paid per Share (2)		Total Number of Shares Repurchased as Part of Publicly Announced Plans (2) (3) (in millions)	Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Plans (4) (in millions)
January 30 to February 26, 2023	—	$	—	—	$	—
February 27 to April 2, 2023	—	$	—	—	$	100.0
April 3 to April 30, 2023	3.61	$	34.82	3.61	$	174.5
May 1 to May 28, 2023	2.09	$	35.63	5.70	$	100.0
May 29 to July 2, 2023	—	$	—	—	$	100.0
July 3 to July 30, 2023	—	$	—	—	$	100.0


	Thirteen Weeks Ended July 30, 2023				Thirteen Weeks Ended July 31, 2022
Entertainment revenues	$	360.8	66.6	%	$	311.4	66.5	%
Food and beverage revenues	181.3		33.4	%	157.0		33.5	%
Total revenues	542.1		100.0	%	468.4		100.0	%
Cost of entertainment (% of entertainment revenues)	34.4		9.5	%	29.1		9.3	%
Cost of food and beverage (% of food and beverage revenues)	49.2		27.1	%	46.5		29.6	%
Total cost of products	83.6		15.4	%	75.6		16.1	%
Operating payroll and benefits	127.0		23.4	%	113.6		24.3	%
Other store operating expenses	169.1		31.2	%	142.5		30.4	%
General and administrative expenses	32.2		5.9	%	37.7		8.0	%
Depreciation and amortization expenses	49.1		9.1	%	38.6		8.2	%
Pre-opening costs	4.0		0.7	%	3.9		0.8	%
Total operating costs	465.0		85.8	%	411.9		87.9	%
Operating income	77.1		14.2	%	56.5		12.1	%
Interest expense, net	32.9		6.1	%	17.1		3.7	%
Loss on debt refinancing	11.2		2.1	%	1.5		0.3	%
Income before provision for income taxes	33.0		6.1	%	37.9		8.1	%
Provision for income taxes	7.1		1.3	%	8.8		1.9	%
Net income	$	25.9	4.8	%	$	29.1	6.2	%
Company-owned stores at end of period			211				200


	Thirteen Weeks Ended July 30, 2023		Thirteen Weeks Ended July 31, 2022
New store and operating initiatives	$	48.0	$	37.0
Games	7.9		17.8
Maintenance capital	31.7		7.3
Total capital additions	$	87.6	$	62.1
Payments from landlords	$	4.9	$	7.2


	Twenty-Six Weeks Ended July 30, 2023				Twenty-Six Weeks Ended July 31, 2022
Entertainment revenues	$	753.9	66.2	%	$	610.6	66.4	%
Food and beverage revenues	385.5		33.8	%	308.9		33.6	%
Total revenues	1,139.4		100.0	%	919.5		100.0	%
Cost of entertainment (% of entertainment revenues)	68.7		9.1	%	55.9		9.2	%
Cost of food and beverage (% of food and beverage revenues)	105.2		27.3	%	89.7		29.0	%
Total cost of products	173.9		15.3	%	145.6		15.8	%
Operating payroll and benefits	257.6		22.6	%	207.0		22.5	%
Other store operating expenses	339.1		29.8	%	266.9		29.0	%
General and administrative expenses	63.6		5.6	%	66.0		7.2	%
Depreciation and amortization expenses	98.0		8.6	%	71.9		7.8	%
Pre-opening costs	8.7		0.8	%	6.9		0.8	%
Total operating costs	940.9		82.6	%	764.3		83.1	%
Operating income	198.5		17.4	%	155.2		16.9	%
Interest expense, net	63.6		5.6	%	28.5		3.1	%
Loss on debt refinancing	11.2		1.0	%	1.5		0.2	%
Income before provision for income taxes	123.7		10.9	%	125.2		13.6	%
Provision for income taxes	27.7		2.4	%	29.1		3.2	%
Net income	$	96.0	8.4	%	$	96.1	10.5	%
Company-owned stores at end of period			211				200


			Trailing Four Quarters Ended July 30, 2023
Net income			$137.0
Add back:
Interest expense, net			122.5
Loss on debt refinancing			11.2
Provision for income taxes			35.1
Depreciation and amortization expense			195.4
EBITDA			501.2
Add back:
Loss on asset disposal			1.1
Impairment of long-lived assets			1.7
Share-based compensation			23.6
Transaction and integration costs			14.9
System implementation costs			3.8
Pre-opening costs			16.4
Entertainment revenue deferrals			12.3
Other items, net			0.4
Credit Adjusted EBITDA, a non-GAAP measure			$575.4


Exhibit Number						Description

31.1*						Certification of Christopher Morris, Chief Executive Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a).

31.2*						Certification of Michael A. Quartieri, Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a).

32.1*						Certification of Christopher Morris, Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*						Certification of Michael A. Quartieri, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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	DAVE & BUSTER’S ENTERTAINMENT, INC., a Delaware corporation

Date: September 6, 2023	By:	/s/ Christopher Morris
		Christopher Morris
		Chief Executive Officer

Date: September 6, 2023	By:	/s/ Michael A. Quartieri
		Michael A. Quartieri
		Chief Financial Officer