Dave & Buster's Entertainment, Inc 10-Q for FY2024 Q3
Dave & Buster's Entertainment, Inc. (PLAY)
10-Q
2023-12-05
For: 2023-10-29
View Original
Added on
April 12, 2026
About this 10-Q
Dave & Buster's Entertainment, Inc filed this 10-Q on December 5, 2023, covering the quarter ended October 29, 2023 (FY2024 Q3).
Headline figures
Quarter ended October 29, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $466.9M
- down 3.0% from $481.2M a year earlier
- Diluted EPS
- -$0.12
- compared with $0.04 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
FOR THE QUARTERLY PERIOD ENDED October 29, 2023
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
FOR THE TRANSITION PERIOD FROM TO
Commission File No. 001-35664
(Exact name of registrant as specified in its charter)
| (State of Incorporation) | (I.R.S. Employer ID) | ||||
( | |||||
| (Address of principal executive offices) (Zip Code) | (Registrant’s telephone number) | ||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| x | Accelerated filer | ¨ | ||||||||||||
| Non-accelerated filer | ¨ | Smaller reporting company | ||||||||||||
| Emerging Growth Company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of December 1, 2023, the registrant had 40,189,128 shares of common stock, $0.01 par value per share, outstanding.
DAVE & BUSTER’S ENTERTAINMENT, INC.
FORM 10-Q FOR QUARTERLY PERIOD ENDED OCTOBER 29, 2023
TABLE OF CONTENTS
| Page | ||||||||
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
| October 29, 2023 | January 29, 2023 | ||||||||||
| (Unaudited) | (Audited) | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Inventories | |||||||||||
| Prepaid expenses | |||||||||||
| Income taxes receivable | |||||||||||
| Accounts receivable | |||||||||||
| Total current assets | |||||||||||
Property and equipment (net of $ | |||||||||||
| Operating lease right of use assets, net | |||||||||||
| Deferred tax assets | |||||||||||
| Tradenames | |||||||||||
| Goodwill | |||||||||||
| Other assets and deferred charges | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Current installments of long-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued liabilities | |||||||||||
| Income taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Long-term debt, net | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock, par value $ | |||||||||||
Preferred stock, | |||||||||||
| Paid-in capital | |||||||||||
Treasury stock, | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
3
DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, except per share amounts; unaudited)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| October 29, 2023 | October 30, 2022 | October 29, 2023 | October 30, 2022 | ||||||||||||||||||||
| Entertainment revenues | $ | $ | $ | $ | |||||||||||||||||||
| Food and beverage revenues | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Cost of entertainment | |||||||||||||||||||||||
| Cost of food and beverage | |||||||||||||||||||||||
| Total cost of products | |||||||||||||||||||||||
| Operating payroll and benefits | |||||||||||||||||||||||
| Other store operating expenses | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Depreciation and amortization expenses | |||||||||||||||||||||||
| Pre-opening costs | |||||||||||||||||||||||
| Total operating costs | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Loss on debt refinancing | |||||||||||||||||||||||
| Income (loss) before provision for income taxes | ( | ||||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ( | |||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Unrealized foreign currency translation loss | ( | ( | ( | ( | |||||||||||||||||||
| Unrealized gain on derivatives, net of tax | |||||||||||||||||||||||
| Total other comprehensive gain (loss) | ( | ( | ( | ||||||||||||||||||||
| Total comprehensive income (loss) | $ | ( | $ | $ | $ | ||||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||||||||
| Basic | $ | ( | $ | $ | $ | ||||||||||||||||||
| Diluted | $ | ( | $ | $ | $ | ||||||||||||||||||
| Weighted average shares used in per share calculations: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
4
DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions; unaudited)
| Thirty-Nine Weeks Ended October 29, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance January 29, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance April 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Unrealized foreign currency translation gain | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance July 30, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized foreign currency translation loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance October 29, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
5
DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions; unaudited)
| Thirty-Nine Weeks Ended October 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance January 30, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Derivatives, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance May 1, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Derivatives, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance July 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Unrealized foreign currency translation loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Derivatives, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balance October 30, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
6
DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization expense | ||||||||||||||
| Non-cash interest expense | ||||||||||||||
| Deferred taxes | ||||||||||||||
| Loss on debt refinancing | ||||||||||||||
| Share-based compensation | ||||||||||||||
| Other, net | ||||||||||||||
| Changes in assets and liabilities, net of assets and liabilities acquired: | ||||||||||||||
| Inventories | ( | |||||||||||||
| Prepaid expenses | ( | ( | ||||||||||||
| Income tax receivable | ||||||||||||||
| Accounts receivable | ( | |||||||||||||
| Other assets and deferred charges | ||||||||||||||
| Accounts payable | ( | ( | ||||||||||||
| Accrued liabilities | ( | |||||||||||||
| Income taxes payable | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Net cash provided by operating activities: | ||||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditures | ( | ( | ||||||||||||
| Acquisition of a business, net of cash acquired | ( | |||||||||||||
| Proceeds from sales of property and equipment | ||||||||||||||
| Net cash used in investing activities: | ( | ( | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from term loan and revolver | ||||||||||||||
| Term loan and revolver payments | ( | ( | ||||||||||||
| Debt issuance costs | ( | ( | ||||||||||||
| Proceeds from sale-leaseback transaction | ||||||||||||||
| Proceeds from the exercise of stock options | ||||||||||||||
| Repurchases of common stock under share repurchase program | ( | ( | ||||||||||||
| Repurchases of common stock to satisfy employee withholding tax obligations | ( | ( | ||||||||||||
| Net cash provided by (used in) financing activities: | ( | |||||||||||||
| Increase (decrease) in cash and cash equivalents | ( | |||||||||||||
| Beginning cash and cash equivalents | ||||||||||||||
| Ending cash and cash equivalents | $ | $ | ||||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||||
| Increase (decrease) in fixed asset accounts payable | $ | $ | ( | |||||||||||
| Cash paid (refund received) for income taxes, net | $ | $ | ( | |||||||||||
| Cash paid for interest, net | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
7
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
Note 1: Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the accounts of Dave & Buster’s Entertainment, Inc. (referred to herein as the “Company”, “we,” “us” and “our”), any predecessor companies and its wholly-owned subsidiaries, Dave & Buster’s Holdings, Inc. (“D&B Holdings”), which owns 100 % of the outstanding common stock of Dave & Buster’s, Inc. (“D&B Inc”), the operating company. The Company, headquartered in Coppell, Texas, is a leading operator of high-volume entertainment and dining venues (“stores”) in North America for adults and families.
During the thirty-nine weeks ended October 29, 2023, the Company opened ten stores, and as of October 29, 2023, the Company owned and operated 214 stores in 42 states, Puerto Rico and one Canadian province.
The Company operates its business as two operating segments based on its major brands, Dave & Buster's and Main Event. The Company has one reportable segment as both brands provide similar products and services to a similar customer base, are managed together by a single management team and share similar economic characteristics.
Main Event Acquisition — On June 29, 2022 (the “Closing Date”), the Company completed its acquisition (the “Main Event Acquisition” or “the Acquisition”) of 100 % of the equity interests of Ardent Leisure US Holding Inc. (“Ardent US”), pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated April 6, 2022, by and among the Company, Ardent US, Delta Bravo Merger Sub, Inc, the Company’s wholly-owned subsidiary formed for the purpose of completing the transactions set forth in the Merger Agreement, for the limited purposes set forth therein, Ardent Leisure Group Limited (“Ardent”), and, for the limited purposes set forth therein, RB ME LP (“RedBird”) and RB ME Blocker, LLC, RB ME Series 2019 Investor Aggregator LP and RedBird Series 2019 GP Co-Invest, LP. Refer to Note 2, Business Combinations, for further discussion of the Main Event Acquisition.
Basis of Presentation — The Company’s financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Our quarterly financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended January 29, 2023, included in our Annual Report on Form 10-K. Amounts in the consolidated financial statements of this Quarterly Report on Form 10-Q are presented in millions. The amounts in the consolidated financial statements, and the notes thereto, of our Annual Report on Form 10-K were presented in thousands.
Cash and cash equivalents — We consider transaction settlements in process from credit card companies and all highly-liquid investments with original maturities of three months or less to be cash equivalents. Our cash management system provides for the daily funding of all major bank disbursement accounts as checks are presented for payment. Under this system, outstanding checks in excess of the cash balances at certain banks create book overdrafts. There were no
Fair value of financial instruments — Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current
8
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
market conditions. In determining fair value, the accounting standards establish a three-level hierarchy for inputs used in measuring fair value.
The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, and other current liabilities approximate fair value because of their short-term nature. The fair value of the Company’s debt is determined based on traded price data as of the measurement date, which we classify as a level two input within the fair value hierarchy as defined under GAAP. The fair value of the Company's debt was as follows as of the periods indicated:
| October 29, 2023 | January 29, 2023 | ||||||||||
| Revolving credit facility | $ | ||||||||||
| Term loan | |||||||||||
| Senior secured notes | |||||||||||
| $ | $ | ||||||||||
The Company also measures certain non-financial assets (primarily property and equipment, right-of-use assets, goodwill, tradenames, and other assets) at fair value on a non-recurring basis in connection with its periodic evaluations of such assets for potential impairment. The Company recorded $1.7 of property and equipment impairment that was removed from service during the thirty-nine weeks ended October 29, 2023.
Revenues — Our entertainment revenues primarily consist of attractions including redemption and simulation games, bowling, laser tag, billiards and gravity ropes. Our food and beverage revenues consist of full meals, appetizers and both alcoholic and non-alcoholic beverages. The Company's revenue for these categories was as follows:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| October 29, 2023 | October 30, 2022 | October 29, 2023 | October 30, 2022 | ||||||||||||||||||||
| Entertainment | $ | $ | $ | $ | |||||||||||||||||||
Other (1) | |||||||||||||||||||||||
| Entertainment revenues | $ | $ | $ | $ | |||||||||||||||||||
| Food and non-alcoholic beverages | $ | $ | $ | $ | |||||||||||||||||||
| Alcoholic beverages | |||||||||||||||||||||||
| Food and beverage revenues | $ | $ | $ | $ | |||||||||||||||||||
(1) Primarily consists of revenue earned from party rentals and gift card breakage (see Revenue recognition below).
Revenue recognition — Customers purchase cards with game play credits or “chips” to be used on a variety of redemption and simulation games. Entertainment revenues related to game play primarily consist of game play credits, which are used by customers to activate video and redemption games. Redemption games allow customers to earn tickets, which may be redeemed for prizes. We have deferred a portion of entertainment revenues for the estimated unfulfilled performance obligations related to unredeemed game play credits and tickets. The deferral is based on an estimated rate of future use by customers of unused game play credits and the material right provided to customers to redeem tickets in the future for prizes. During the thirty-nine weeks ended October 29, 2023, we recognized revenue of approximately $51.9 related to the amount in deferred entertainment revenues as of the end of fiscal 2022. These revenues are included in entertainment revenues on the consolidated statement of comprehensive income (loss).
We recognize revenue on unredeemed gift cards in proportion to the pattern of redemption by the customers. During the thirty-nine weeks ended October 29, 2023, we recognized revenue of approximately $7.5 related to the amount in deferred gift card revenue as of the end of fiscal 2022. These revenues are included in Entertainment revenues on the consolidated statement of comprehensive income (loss).
Earnings per share — Basic net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the basic weighted average number of common shares outstanding for the reporting period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue
9
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||||||||||||||
| October 29, 2023 | October 30, 2022 | October 29, 2023 | October 30, 2022 | ||||||||||||||||||||||||||||||||
| Basic weighted average shares outstanding | |||||||||||||||||||||||||||||||||||
| Weighted average dilutive impact of awards | |||||||||||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | |||||||||||||||||||||||||||||||||||
Weighted average awards excluded as anti-dilutive | |||||||||||||||||||||||||||||||||||
Acquisitions — The Company accounts for acquisitions under the acquisition method of accounting, which requires the acquired assets and liabilities, including contingencies, be recorded at fair value determined on the acquisition date and changes thereafter reflected in income. For significant acquisitions, the Company obtains independent third-party valuation studies for certain of the assets acquired and liabilities assumed to assist the Company in determining fair value. The estimation of the fair values of the assets acquired and liabilities assumed involves a number of estimates and assumptions that could differ materially from the actual amounts realized. The Company provides assumptions, including both quantitative and qualitative information, about the specified asset or liability to the third-party valuation firms so they can assist in determining the fair value of assets and liabilities acquired. The Company then records acquired assets and liabilities at their estimated fair value based on the information provided. The third-party valuation firms are supervised by Company personnel who are knowledgeable about valuations and fair value. The Company evaluates the appropriateness of the assumptions and valuation methodologies utilized by the third-party valuation firms.
Recent accounting pronouncements — We reviewed the accounting pronouncements that became effective for fiscal year 2023 and determined that either they were not applicable, or they did not have a material impact on the consolidated financial statements. We also reviewed the recently issued accounting pronouncements to be adopted in future periods and determined that they are not expected to have a material impact on the consolidated financial statements.
Note 2: Business Combinations
On June 29, 2022, the Company acquired Main Event for net cash and contingent consideration. Main Event is also focused on entertainment, food and drinks, largely for the demographic target of families with young children. The acquisition puts the Company in a strategic position for accelerated, profitable growth in both brands as well as create cost synergies with our Dave & Buster’s brand. We finalized our accounting for the Main Event Acquisition in the second quarter of 2023.
10
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
The components of the purchase price and net assets acquired in the Main Event Acquisition are as follows:
| Amount | |||||
| Gross cash consideration | $ | ||||
Contingent consideration (1) | |||||
| Less: cash acquired | ( | ||||
| Total consideration paid | $ | ||||
| Assets: | |||||
| Current assets | |||||
| Property and equipment | |||||
| Operating lease right of use assets | |||||
| Tradename | |||||
| Other assets and deferred charges | |||||
| Liabilities: | |||||
| Accounts payable | |||||
| Current portion of operating lease liabilities | |||||
| Accrued liabilities | |||||
| Operating lease liabilities | |||||
| Deferred tax liabilities | |||||
| Other long-term liabilities | |||||
| Net assets acquired, excluding goodwill | $ | ||||
| Goodwill | $ | ||||
(1)The Company has an obligation to pay, in cash, an aggregate amount equal to any “Transaction Tax Benefits,” with respect to any taxable year of the Company after the Closing Date ending on or before December 31, 2028, including the current taxable year. This amount is based on the present value of the maximum amount provided in the Merger Agreement.
Unaudited Pro Forma Information
To reflect the Acquisition as if it had occurred on January 31, 2022, the unaudited pro forma results include adjustments to reflect, among other things, the interest expense from debt financings obtained to partially fund the cash consideration transferred. Pro forma adjustments were tax effected at the Company’s historical statutory rates in effect for the respective periods. The unaudited pro forma amounts are not necessarily indicative of the combined results of operations that would have been realized had the acquisitions and related financings occurred on the aforementioned dates, nor are they meant to be indicative of any anticipated combined results of operations that the Company will experience after the transaction. In addition, the amounts do not include any adjustments for actions that may be taken following the completion of the transaction, such as expected cost savings, operating synergies, or revenue enhancements that may be realized subsequent to the transaction.
The following unaudited pro forma information provides the effect of the Main Event Acquisition as if the acquisition had occurred on January 31, 2022:
| Thirty-Nine Weeks Ended | |||||
| October 30, 2022 | |||||
| Revenues | $ | ||||
| Net income | $ | ||||
The historical consolidated financial information of the Company and Main Event, as presented in the table above, has been adjusted to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements and are factually supportable.
11
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
Note 3: Goodwill and Tradename Assets
The changes in the carrying amount of goodwill and tradename assets during fiscal 2023 and fiscal 2022 are as follows:
| Goodwill | Tradename | ||||||||||
| Balance at January 30, 2022 | $ | $ | |||||||||
Acquisition of Main Event (1) | |||||||||||
| Balance at January 29, 2023 | $ | $ | |||||||||
Adjustments to Main Event goodwill (1)(2) | ( | ||||||||||
| Balance at October 29, 2023 | $ | $ | |||||||||
(1) See Note 2 for discussion of the Main Event acquisition.
(2) Adjustments to preliminary purchase price. The Company finalized its purchase accounting related to the Main Event acquisition in the second quarter of fiscal 2023.
Note 4: Accrued Liabilities
Accrued liabilities consist of the following as of the dates presented:
| October 29, 2023 | January 29, 2023 | ||||||||||
| Deferred entertainment revenue | $ | $ | |||||||||
| Compensation and benefits | |||||||||||
| Accrued interest | |||||||||||
| Deferred gift card revenue | |||||||||||
| Customer deposits | |||||||||||
| Property taxes | |||||||||||
| Sales and use and other taxes | |||||||||||
| Occupancy and variable rent costs | |||||||||||
| Utilities | |||||||||||
| Worker's compensation and general liability claims | |||||||||||
Other (2) | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
(1)The balance of leasehold incentive receivables of $6.0 and $6.0 as of October 29, 2023 and January 29, 2023, respectively, is reflected as a reduction of the current portion of operating lease liabilities.
(2)Includes $13.8 accrued transaction tax benefits related to the Main Event acquisition discussed at Note 2 to the consolidated financial statements.
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DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
Note 5: Leases
We currently lease most of the buildings or sites for our stores, store support center, and warehouse space under facility operating leases. These leases typically have initial terms ranging from to twenty years and include one or more options to renew. When determining the lease term, we include option periods for which renewal is reasonably certain. Most of the leases require us to pay property taxes, insurance, and maintenance of the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Operating leases also include certain equipment leases that have a term in excess of one year. Certain facility leases also have provisions for additional contingent rentals based on revenues.
Operating lease cost, variable lease cost and short-term lease cost related primarily to our facilities is included in “Other store operating expenses” for our operating stores, “Pre-opening costs” for our stores not yet operating, or “General and administrative expenses” for our store support center and warehouse, in the consolidated statement of comprehensive income (loss).
The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and property taxes, are as follows:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||
| October 29, 2023 | October 30, 2022 | October 29, 2023 | October 30, 2022 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Short-term lease cost | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Operating lease payments in the table above includes minimum lease payments for future sites for which the leases have commenced. As of October 29, 2023, the Company had signed lease agreements with total lease payments of approximately $179.2 related to ten facility leases which had not yet commenced. Fixed minimum lease payments related to these facilities are not included in the right-of-use assets and lease liabilities on the consolidated balance sheet as of October 29, 2023.
Sale-Leaseback Transaction
In October 2023, the Company entered into a sale and master lease agreement (a "sale-leaseback") with an unrelated third party. Under these agreements, the Company sold four of its store properties, including land, buildings and certain improvements, at a sale price of $85.8 and then leased the assets back through the sale-leaseback transaction.
Based on certain criteria and in accordance with U.S. GAAP, the transaction was accounted for as a failed sale-leaseback. As a result, the store property assets remain on the consolidated balance sheet at their historical net book value and are depreciated over the remaining term of the master lease. A financing obligation liability was recognized in the amount of the net proceeds received in the amount of $84.2 . The Company will not recognize rent expense related to the leased assets. Instead, monthly rent payments under the master lease agreement (initially, $6.4 per year) will be recorded as interest expense and a reduction of the outstanding liability.
As of October 29, 2023 the current outstanding liability of $0.2 was recorded in accrued liabilities and the long term outstanding liability of $84.0 was recorded in other liabilities on the consolidated balance sheet related to the financing liability.
13
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
Note 6: Debt
Long-term debt consists of the following:
| October 29, 2023 | January 29, 2023 | ||||||||||
| Credit facility—revolver | $ | $ | |||||||||
| Credit facility—term loan | |||||||||||
| Senior secured notes | |||||||||||
| Total debt outstanding | |||||||||||
| Less current installments of long-term debt | ( | ( | |||||||||
| Less issue discounts and debt issuance costs | ( | ( | |||||||||
| Long-term debt, net | $ | $ | |||||||||
June 29, 2022 Credit Facility
In connection with the closing of the Main Event Acquisition on June 29, 2022, D&B Inc entered into a senior secured credit agreement, which refinanced the $500.0 existing revolving facility, extended the maturity date to June 29, 2027, and added a new term loan facility in the aggregate principal amount of $850.0 , with a maturity date of June 29, 2029 (“Credit Facility”). The proceeds of the term loan, net of an original issue discount of $42.5 , were used to pay the consideration for the Acquisition. The revolving credit facility can expire before the stated maturity date if the aggregate outstanding principal amount of the 7.625 % senior notes (described below) exceeds $100.0 91 days prior to November 1, 2025. A portion of the revolving facility not to exceed $35.0 is available for the issuance of letters of credit.
As of October 29, 2023, we had letters of credit outstanding of $9.8 and an unused commitment balance of $490.2 under the revolving facility. The Credit Facility may be increased through incremental facilities, by an amount equal to the greater of (i) $400.0 and (ii) 0.75 times trailing twelve-month Adjusted EBITDA, as defined, plus additional amounts subject to compliance with applicable leverage ratio and/or interest coverage ratio requirements. The Credit Facility is unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries.
During fiscal 2020, the Company issued $550.0 aggregate principal amount of 7.625 % senior secured notes (the “Notes”). Interest on the Notes is payable in arrears on November 1 and May 1 of each year. The Notes mature on November 1, 2025, unless earlier redeemed, and are subject to the terms and conditions set forth in the related indenture. The Notes were issued by D&B Inc and are unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries. During fiscal 2022, the Company redeemed a total of $110.0 outstanding principal amount of the Notes. The Company may elect to further redeem the Notes, in whole or in part, at certain specified redemption prices, plus accrued and unpaid interest, at the redemption date.
First Amendment to the Credit Facility (the "Amendment")
On June 30, 2023, D&B Inc entered into the Amendment with its banking syndicate, which amended the Credit Facility. The Amendment provides for a new tranche of term loans in an aggregate principal amount of $900.0 (the “2023 Term B Loans”) which consist of $843.6 of 2023 refinancing Term B Loans which refinanced in full the term loans outstanding immediately prior to the Amendment effective date and $56.4 of 2023 additional Term B Loans, which will be used for general corporate and working capital purposes. The 2023 Term B Loans were issued with an original issue discount of 1 %, reduced the interest rate margin applicable to term loans and revolving loans outstanding under the Credit Agreement by 1.25 % and otherwise have terms substantially the same as the terms of the existing Term B Loans under the June 29, 2022 Credit Facility. The 2023 Term B Loans may be prepaid at any time, without premium or penalty, but are subject to a prepayment premium of 1.00 % (subject to certain exceptions) if certain refinancing of, or amendment to, reduce the all-in-yield of the 2023 Term B Loans is made at any time during the first six months after the Amendment effective date.
The 2023 Term B Loans bear interest at Term SOFR (plus an additional credit spread adjustment of 0.10 %) or ABR (each, as defined in the amended Credit Agreement) plus (i) in the case of Term SOFR loans, 3.75 % per annum and (ii) in
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DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
the case of ABR loans, 2.75 % per annum. The Revolving Loans bear interest subject to a pricing grid based on the Borrower’s net total leverage, at Term SOFR (plus an additional credit spread adjustment of 0.10 %) plus a spread ranging from 3.00 % to 3.50 % per annum or ABR plus a spread ranging from 2.00 % to 2.50 % per annum. Unused commitments under the revolving facility incur initial commitment fees of 0.30 % to 0.50 %.
Loss on debt refinancing and amortization of issuance costs
Immediately prior to the Amendment, the Company had $46.9 of unamortized issuance discounts and costs. As certain lenders exited the syndicate and were replaced by new syndicate members and the term loan facility was increased in size, a portion of the term loan facility was deemed extinguished and a portion was determined to be modified. As a result, $8.5 of unamortized costs were written off and $2.7 of new fees were expensed on the modified portion resulting in a total charge of $11.2 included in loss on debt refinancing on the consolidated statement of income for the thirty-nine weeks ended October 29, 2023. The remaining $38.4 of the unamortized issuance discounts and $9.4 of new issuance discount and costs were deferred and will be amortized into interest expense, net.
Amortization of debt issuance costs and original issue discount was $8.9 and $5.5 for the thirty-nine weeks ended October 29, 2023 and October 30, 2022, respectively. The Company’s weighted average effective interest rate on our total debt facilities was 10.3 % and 9.5 % for the thirty-nine weeks ended October 29, 2023 and October 30, 2022, respectively.
Restrictive covenants and debt compliance
Our debt agreements contain restrictive covenants that, among other things, place certain limitations on our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, pay dividends, acquire other businesses or sell assets. The Credit Facility also requires the Company to maintain a maximum net total leverage ratio, as defined, as of the end of each fiscal quarter. We were in compliance with our covenants and the terms of our debt agreements as of October 29, 2023.
Note 7: Commitments and Contingencies
We are subject to certain legal proceedings and claims that arise in the ordinary course of our business, including claims alleging violations of federal and state law regarding workplace and employment matters, discrimination, slip-and-fall and other customer-related incidents and similar matters. In the opinion of management, based upon consultation with legal counsel, the amount of ultimate liability, with respect to such legal proceedings and claims will not materially affect the consolidated results of our operations or our financial condition. Legal costs related to such claims are expensed as incurred.
15
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
Note 8: Stockholders' Equity and Share-Based Compensation
Share issuances and repurchases
The Company treats shares withheld for tax purposes on behalf of our employees in connection with the vesting of time-based and performance restricted stock units as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. These were immaterial for all periods presented.
On March 27, 2023, our Board of Directors approved a share repurchase program with an authorization limit of $100.0 . On April 19, 2023, our Board of Directors approved an increase to the authorization limit of $200.0 for a total of $300.0 authorized under the program. On September 4, 2023 our Board of Directors approved an increase to the authorization limit of $100.0 for a total of $400.0 authorized under the program. During the thirty-nine weeks ended October 29, 2023, the Company repurchased 8.49 million shares at an average of $35.35 per share. The remaining dollar value of shares that may be repurchased under the program is $100.0 as of October 29, 2023. Future decisions to repurchase shares continue to be at the discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Board of Directors considers relevant.
Share-based compensation
Our compensation expense related to share-based compensation was as follows:
| Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||||||||||||||||||||||||||
| October 29, 2023 | October 30, 2022 | October 29, 2023 | October 30, 2022 | ||||||||||||||||||||||||||||||||
| General and administrative expenses | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
Our share-based compensation award activity during the thirty-nine weeks ended October 29, 2023 was as follows:
| Options | Restricted Stock Units | Total | |||||||||||||||
| Outstanding at January 29, 2023 | |||||||||||||||||
| Granted | |||||||||||||||||
| Exercised | ( | ( | |||||||||||||||
| RSU vestings | n/a | ( | ( | ||||||||||||||
| Forfeited | ( | ( | ( | ||||||||||||||
| Outstanding at October 29, 2023 | |||||||||||||||||
| Remaining unrecognized compensation expense | $ | $ | $ | ||||||||||||||
The fair value of our time-based and performance-based restricted stock units is based on our closing stock price on the date of grant. The grant date fair value of stock options was determined using the Black-Scholes option valuation model. The grant date fair value of performance-based awards with market conditions was determined using the Monte Carlo valuation model. The unrecognized expense will all be substantially recognized by the end of fiscal 2025.
During the thirty-nine weeks ended October 29, 2023, the Company granted certain options, time-based, performance-based, and market-based restricted stock units to employees and directors of the Company. These grants vest over a range of one year to five years . Certain of the market-based restricted stock units can vest earlier if the targets are achieved prior to that time. As a result, the requisite service period for such grants was determined to be less than the explicit service period.
16
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except per share amounts; unaudited)
Note 9: Income Taxes
The effective tax rate for the thirty-nine weeks ended October 29, 2023, was 19.9 %, compared to 22.8 % for the thirty-nine weeks ended October 30, 2022. The current year tax provision includes a favorable state apportionment impact resulting from the acquisition of Main Event and legal entity restructuring as well as lower permanent differences, primarily non-deductible transaction costs and credits associated with the reversal of certain tax valuation allowances as compared to the prior year.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in fiscal 2018, 2019 and 2020. The Company has $0.8 of federal tax refunds remaining from the fiscal 2020 carryback claim filed during fiscal 2021.
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the accompanying unaudited consolidated financial statements and the related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 28, 2023. Amounts included in the following discussion, except for operating weeks and per share amounts, are rounded in millions.
Unless otherwise specified, the meanings of all defined terms in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are consistent with the meanings of such terms as defined in the Notes to Unaudited Consolidated Financial Statements. This discussion contains statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not a guarantee of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this quarterly report as a result of various factors, including those set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 28, 2023. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, such results or developments may not be indicative of results or developments in subsequent periods.
Quarterly Financial Highlights
•Third quarter revenue of $466.9 million decreased 3.0% from the third quarter of 2022.
•Pro forma combined comparable store sales (including Main Event branded stores) decreased 7.8% compared with the same period in 2022 and increased 8.1% compared with the same period in 2019.
•Net loss totaled $5.2 million, or $(0.12) per diluted share, compared with net income of $1.9 million, or $0.04 per diluted share in the third quarter of 2022.
•Adjusted EBITDA of $81.6 million, or 17.5% of revenue, in the quarter decreased 5.2% from the third quarter of 2022.
•The Company ended the third quarter with $554.2 million of liquidity, which included $64.0 million in cash and $490.2 million available under its $500 million revolving credit facility.
•The Company opened two new Dave & Buster's stores and one new Main Event store in the third quarter.
•The Company repurchased 2.8 million shares at a total cost of $100.0 million in the third quarter. Total share repurchases to date in fiscal 2023 are 8.5 million shares totaling $300.0 million and representing 17.5% of the Company's outstanding shares as of the end of fiscal 2022. The Company has $100.0 million remaining on its share repurchase authorization. See Note 8 to the consolidated financial statements for further discussion of share repurchases.
•The Company entered into a sale leaseback transaction with an institutional real estate investor for the real estate of four Dave & Buster's stores generating $85.8 million in proceeds. See Note 5 to the consolidated financial statements for further discussion of the transaction.
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General
We are a leading owner and operator of high-volume venues in North America that combine dining and entertainment for both adults and families under the “Dave & Buster’s” and “Main Event” brands. The core of our concept is to offer our customers quality dining and various forms of entertainment all in one location. Our entertainment offerings provide an extensive assortment of attractions centered around playing games, bowling, and watching live sports and other televised events. Our brands appeal to a relatively balanced mix of male and female adults, as well as families and young adults. We believe we appeal to a diverse customer base by providing a highly customizable experience in a dynamic and fun setting.
Our Dave & Buster’s stores average 40,000 square feet and range in size between 16,000 and 70,000 square feet. Our Main Event stores average 54,000 square feet and range in size between 37,500 and 78,000 square feet. Generally, our stores are open seven days a week, with normal hours of operation generally from between 10:00 to 11:30 a.m. until midnight, with stores typically open for extended hours on weekends.
Key Measures of Our Performance
We monitor and analyze several key performance measures to manage our business and evaluate financial and operating performance, including:
Comparable store sales. Comparable store sales are a comparison of sales to the same period of prior years for the comparable store base. We historically define the comparable store base to include those stores open for a full 18 months before the beginning of the fiscal year and excluding stores permanently closed during the period. For fiscal 2023, our comparable store base consists of 141 Dave & Buster's branded stores. Our Main Event branded stores are not included in comparable store sales for the thirteen and thirty-nine weeks ended October 29, 2023.
New store openings. Our ability to expand our business and reach new customers is influenced by the opening of additional stores in both new and existing markets. The success of our new stores is indicative of our brand appeal and the efficacy of our site selection and operating models. For the thirty-nine weeks ended October 29, 2023, we opened ten new stores (five Dave & Buster's branded stores and five Main Event branded stores).
Non-GAAP Financial Measures
In addition to the results provided in accordance with generally accepted accounting principles (“GAAP”), we provide non-GAAP measures which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP and include Adjusted EBITDA, Adjusted EBITDA Margin, Credit Adjusted EBITDA, Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin (defined below). These non-GAAP measures do not represent and should not be considered as an alternative to net income or cash flows from operations, as determined in accordance with GAAP, and our calculations thereof may not be comparable to similarly titled measures reported by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Although we use these non-GAAP measures to assess the operating performance of our business, they have significant limitations as an analytical tool because they exclude certain material costs. For example, Adjusted EBITDA does not take into account a number of significant items, including our interest expense and depreciation and amortization expense. In addition, Adjusted EBITDA excludes certain other costs which may be important in analyzing our GAAP results. Because Adjusted EBITDA does not account for these expenses, its utility as a measure of our operating performance has material limitations. Our calculations of Adjusted EBITDA adjust for these amounts because they do not directly relate to the ongoing operations of the currently underlying business of our stores and therefore complicate comparison of the underlying business between periods. Nevertheless, because of the limitations described above, management does not view Adjusted EBITDA, Adjusted EBITDA Margin, Credit Adjusted EBITDA, Store Operating Income Before Depreciation and Amortization or Store Operating Income Before Depreciation and Amortization Margin in isolation and also uses other measures, such as revenues, gross margin, operating income and net income to measure operating performance.
Adjusted EBITDA and Adjusted EBITDA Margin. We define “Adjusted EBITDA” as net income (loss), plus interest expense, net, loss on debt refinancing, provision for (benefit from) income taxes, depreciation and amortization expense, loss on asset disposal, impairment of long-lived assets, share-based compensation, currency transaction (gains) losses and other costs. “Adjusted EBITDA Margin” is defined as Adjusted EBITDA divided by total revenues.
19
Adjusted EBITDA is presented because we believe that it provides useful information to investors and analysts regarding our operating performance. By reporting Adjusted EBITDA, we provide a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.
Credit Adjusted EBITDA
We define “Credit Adjusted EBITDA” as Adjusted EBITDA plus certain other items as defined in our Credit Facility (see Liquidity and Capital Resources below). Other adjustments include (i) entertainment revenue deferrals, (ii) the cost of new projects, including store pre-opening costs, and (iii) other costs and adjustments as permitted by the debt agreements. We believe the presentation of Credit Adjusted EBITDA is appropriate as it provides additional information to investors about the calculation of, and compliance with, certain financial covenants in the Credit Facility.
Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin.
We define “Store Operating Income Before Depreciation and Amortization” as operating income (loss), plus depreciation and amortization expense, general and administrative expenses and pre-opening costs. “Store Operating Income Before Depreciation and Amortization Margin” is defined as Store Operating Income Before Depreciation and Amortization divided by total revenues. Store Operating Income Before Depreciation and Amortization Margin allows us to evaluate operating performance of each store across stores of varying size and volume.
We believe that Store Operating Income Before Depreciation and Amortization is another useful measure in evaluating our operating performance because it removes the impact of general and administrative expenses, which are not incurred at the store level, and the costs of opening new stores, which are non-recurring at the store level, and thereby enables the comparability of the operating performance of our stores for the periods presented. We also believe that Store Operating Income Before Depreciation and Amortization is a useful measure in evaluating our operating performance within the entertainment and dining industry because it permits the evaluation of store-level productivity, efficiency, and performance, and we use Store Operating Income Before Depreciation and Amortization as a means of evaluating store financial performance compared with our competitors. However, because this measure excludes significant items such as general and administrative expenses and pre-opening costs, as well as our interest expense, net, loss on debt refinancing and depreciation and amortization expense, which are important in evaluating our consolidated financial performance from period to period, the value of this measure is limited as a measure of our consolidated financial performance.
Presentation of Operating Results
We operate on a 52-week or 53-week fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period has 13 weeks, except in a 53-week year when the fourth quarter has 14 weeks. All references to the third quarter of 2023 relate to the 13-week period ended October 29, 2023. All references to the third quarter of 2022 relate to the 13-week period ended October 30, 2022. Fiscal 2023 consists of 53 weeks and fiscal 2022 consists of 52 weeks. All dollar amounts are presented in millions, unless otherwise noted, except per share amounts.
Store-Level Variability, Quarterly Fluctuations, Seasonality and Inflation
We operate stores varying in size and have experienced significant variability among stores in volumes, operating results and net investment costs.
Our new stores typically open with sales volumes in excess of their expected long-term run-rate levels, which we refer to as a “honeymoon” effect. We traditionally expect our new store sales volumes in year two to be 10% to 20% lower than our year one targets, and to grow in line with the rest of our comparable store base thereafter. As a result of the substantial revenues associated with each new store, the number and timing of new store openings will result in significant fluctuations in quarterly results.
New store operating margins (excluding pre-opening expenses) during the first year of operation historically benefit from honeymoon sales leverage on occupancy, management labor and other fixed costs. This benefit is partially offset by normal inefficiencies in hourly labor and other costs associated with establishing a new store. In year two, operating margins may decline due to the loss of honeymoon sales leverage on fixed costs which is partially offset by improvements in store operating efficiency.
Our operating results historically have fluctuated due to seasonal factors. Typically, we have higher revenues associated with the spring and year-end holidays, which will continue to be susceptible to the impact of severe or
20
unseasonably mild weather on customer traffic and sales during that period. Our third quarter, which encompasses the back-to-school fall season, has historically had lower revenues as compared to other quarters.
We expect that economic and environmental conditions and changes in regulatory legislation will continue to exert pressure on both supplier pricing and consumer spending related to entertainment and dining alternatives. There is no assurance that our cost of products will remain stable or that federal, state, or local minimum wage rates will not increase beyond amounts currently legislated, however, the effects of any supplier price increase or wage rate increases might be partially offset by selective price increases if competitively appropriate.
Thirteen Weeks Ended October 29, 2023 Compared to the Thirteen Weeks Ended October 30, 2022
Results of operations. The following table sets forth selected data, in millions of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying unaudited consolidated statement of comprehensive income (loss).
| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | ||||||||||||||||||||||
| Entertainment revenues | $ | 302.0 | 64.7 | % | $ | 315.3 | 65.5 | % | |||||||||||||||
| Food and beverage revenues | 164.9 | 35.3 | % | 165.9 | 34.5 | % | |||||||||||||||||
| Total revenues | 466.9 | 100.0 | % | 481.2 | 100.0 | % | |||||||||||||||||
| Cost of entertainment (% of entertainment revenues) | 29.5 | 9.8 | % | 27.2 | 8.6 | % | |||||||||||||||||
| Cost of food and beverage (% of food and beverage revenues) | 43.3 | 26.3 | % | 49.0 | 29.5 | % | |||||||||||||||||
| Total cost of products | 72.8 | 15.6 | % | 76.2 | 15.8 | % | |||||||||||||||||
| Operating payroll and benefits | 119.9 | 25.7 | % | 126.0 | 26.2 | % | |||||||||||||||||
| Other store operating expenses | 171.3 | 36.7 | % | 163.8 | 34.0 | % | |||||||||||||||||
| General and administrative expenses | 28.4 | 6.1 | % | 32.8 | 6.8 | % | |||||||||||||||||
| Depreciation and amortization expenses | 51.9 | 11.1 | % | 48.4 | 10.1 | % | |||||||||||||||||
| Pre-opening costs | 4.0 | 0.9 | % | 3.9 | 0.8 | % | |||||||||||||||||
| Total operating costs | 448.3 | 96.0 | % | 451.1 | 93.7 | % | |||||||||||||||||
| Operating income | 18.6 | 4.0 | % | 30.1 | 6.3 | % | |||||||||||||||||
| Interest expense, net | 28.9 | 6.2 | % | 28.4 | 5.9 | % | |||||||||||||||||
| Income (loss) before provision for income taxes | (10.3) | (2.2) | % | 1.7 | 0.4 | % | |||||||||||||||||
| Benefit from income taxes | (5.1) | (1.1) | % | (0.2) | — | % | |||||||||||||||||
| Net income (loss) | $ | (5.2) | (1.1) | % | $ | 1.9 | 0.4 | % | |||||||||||||||
| Company-owned stores at end of period | 214 | 200 | |||||||||||||||||||||
Reconciliations of Non-GAAP Financial Measures
Adjusted EBITDA
The following table reconciles (in millions of dollars and as a percent of total revenues) Net income to Adjusted EBITDA for the periods indicated:
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| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | ||||||||||||||||||||||
| Net income (loss) | $ | (5.2) | (1.1) | % | $ | 1.9 | 0.4 | % | |||||||||||||||
| Interest expense, net | 28.9 | 28.4 | |||||||||||||||||||||
| Provision for income taxes | (5.1) | (0.2) | |||||||||||||||||||||
| Depreciation and amortization expense | 51.9 | 48.4 | |||||||||||||||||||||
| EBITDA | 70.5 | 15.1 | % | 78.5 | 16.3 | % | |||||||||||||||||
| Loss on asset disposal | 0.9 | 0.2 | |||||||||||||||||||||
Share-based compensation (1) | 3.5 | 3.2 | |||||||||||||||||||||
Transaction and integration costs (2) | 1.7 | 4.0 | |||||||||||||||||||||
System implementation costs (3) | 3.0 | — | |||||||||||||||||||||
Consulting costs (4) | 2.0 | — | |||||||||||||||||||||
| Other items, net | — | 0.2 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 81.6 | 17.5 | % | $ | 86.1 | 17.9 | % | |||||||||||||||
(1)Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(2)Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(3)System implementation costs represent expenses incurred related to the development of new enterprise resource planning, human capital management and inventory software for our stores and store support teams. These charges are primarily recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(4)Represents one-time, third-party consulting fees that are not part of our ongoing operations and were incurred to execute two related, discrete, and project-based strategic initiatives aimed at transforming our marketing strategy, which are included in general and administrative expenses on the consolidated statement of comprehensive income (loss). The transformative nature, narrow scope, and limited duration of these incremental consulting fees are not reflective of the ordinary course expenses incurred to operate our business.
Store Operating Income Before Depreciation and Amortization
The following table reconciles (in millions of dollars and as a percent of total revenues) Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:
| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | ||||||||||||||||||||||
| Operating income | $ | 18.6 | 4.0 | % | $ | 30.1 | 6.3 | % | |||||||||||||||
| General and administrative expenses | 28.4 | 32.8 | |||||||||||||||||||||
| Depreciation and amortization expense | 51.9 | 48.4 | |||||||||||||||||||||
| Pre-opening costs | 4.0 | 3.9 | |||||||||||||||||||||
| Store Operating Income Before Depreciation and Amortization | $ | 102.9 | 22.0 | % | $ | 115.2 | 23.9 | % | |||||||||||||||
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Capital Additions
The table below reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives (“Payments from landlords”).
| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | ||||||||||
| New store and operating initiatives | $ | 51.7 | $ | 44.5 | |||||||
| Games | 5.4 | 2.9 | |||||||||
| Maintenance | 16.2 | 9.5 | |||||||||
| Total capital additions | $ | 73.3 | $ | 56.9 | |||||||
| Payments from landlords | $ | 5.9 | $ | 20.6 | |||||||
Results of Operations
Revenues
Selected revenue and store data (in millions except for store operating weeks) for the periods indicated are as follows:
| Thirteen Weeks Ended | |||||||||||||||||
| October 29, 2023 | October 30, 2022 | Change | |||||||||||||||
| Total revenues | $ | 466.9 | $ | 481.2 | $ | (14.3) | |||||||||||
| Total store operating weeks | 2,774 | 2,616 | 158 | ||||||||||||||
| Comparable store revenues | $ | 323.9 | $ | 350.9 | $ | (27.0) | |||||||||||
| Comparable store operating weeks | 1,833 | 1,833 | — | ||||||||||||||
| Noncomparable store revenues—Dave & Buster’s | $ | 35.9 | $ | 23.9 | $ | 12.0 | |||||||||||
| Noncomparable store operating weeks—Dave & Buster’s | 188 | 107 | 81 | ||||||||||||||
| Noncomparable store revenues—Main Event | $ | 107.9 | 106.8 | $ | 1.1 | ||||||||||||
| Noncomparable store operating weeks—Main Event | 753 | 676 | 77 | ||||||||||||||
| Other revenues and deferrals | $ | (0.8) | $ | (0.4) | $ | (0.4) | |||||||||||
Revenue mix by category, as a percentage of total revenues, for the periods indicated was as follows:
| Thirteen Weeks Ended | |||||||||||
| October 29, 2023 | October 30, 2022 | ||||||||||
| Entertainment revenues | 64.7 | % | 65.5 | % | |||||||
| Food revenues | 23.5 | % | 23.5 | % | |||||||
| Beverage revenues | 11.8 | % | 11.0 | % | |||||||
Total revenues decreased $14.3 million, or 3.0%, to $466.9 million in the third quarter of 2023 compared to $481.2 million in the third quarter of 2022. The decrease is attributable to a 7.7% decline in comparable store revenue, partially offset by incremental revenue from new, noncomparable, Dave & Buster's stores. The decline in comparable store revenue is due primarily to a reduction in walk-in transaction counts relative to the robust consumer environment of the prior year period, partially offset by increases in food and beverage prices and increases in special event bookings.
Comparable entertainment revenues in the third quarter of 2023 decreased by $20.4 million, or 9.0%, to $205.7 million from $226.1 million in the third quarter of 2022. Food sales at comparable stores decreased by $7.3 million, or 8.6%, to $77.9 million in the third quarter of 2023 from $85.2 million in the third quarter of 2022. Beverage sales at comparable stores increased by $0.7 million, or 1.8%, to $40.3 million in the third quarter of 2023 from $39.6 million in the third quarter of 2022.
23
Cost of products
The total cost of products was $72.8 million for the third quarter of 2023 compared to $76.2 million for the third quarter of 2022. The total cost of products as a percentage of total revenues decreased to 15.6% for the third quarter of 2023 compared to 15.8% for the third quarter of 2022.
Cost of entertainment was $29.5 million in the third quarter of 2023 compared to $27.2 million in the third quarter of 2022. The cost of entertainment, as a percentage of entertainment revenues, increased to 9.8% for the third quarter of 2023 from 8.6% in the third quarter of 2022.
Cost of food and beverage products was $43.3 million for the third quarter of 2023 compared to $49.0 million for the third quarter of 2022. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased to 26.3% for the third quarter of 2023 from 29.5% for the third quarter of 2022. The decrease was primarily attributable to food and beverage menu price increases, continued supply chain and ingredient optimization, and the mix of products sold with our new menu.
Operating payroll and benefits
Total operating payroll and benefits was $119.9 million in the third quarter of 2023 compared to $126.0 million in the third quarter of 2022. The total cost of operating payroll and benefits as a percentage of total revenues was 25.7% in the third quarter of 2023 compared to 26.2% in the third quarter of 2022. This decrease is primarily due to labor management efficiencies and lower incentive compensation, partially offset by hourly wage rate and manager salary increases.
Other store operating expenses
Other store operating expenses was $171.3 million in the third quarter of 2023 compared to $163.8 million in the third quarter of 2022. The increase is primarily due to higher occupancy costs for new stores and marketing costs. Other store operating expense as a percentage of total revenues increased to 36.7% in the third quarter of 2023 compared to 34.0% in the third quarter of 2022. This increase in expense as a percentage of total revenues was due primarily to increased occupancy costs, repairs & maintenance, and marketing costs.
General and administrative expenses
General and administrative expenses decreased to $28.4 million in the third quarter of 2023 compared to $32.8 million in the third quarter of 2022. The decrease in general and administrative expenses was driven primarily by lower merger & integration costs related to the Main Event acquisition and lower incentive compensation, partially offset by higher system implementation and consulting costs. General and administrative expenses as a percentage of total revenues decreased to 6.1% in the third quarter of 2023 compared to 6.8% in the third quarter of 2022 for the same reasons.
Depreciation and amortization expense
Depreciation and amortization expense increased to $51.9 million in the third quarter of 2023 compared to $48.4 million in the third quarter of 2022, primarily due to new store openings.
Pre-opening costs
Pre-opening costs increased to $4.0 million in the third quarter of 2023 compared to $3.9 million in the third quarter of 2022 primarily due to the timing of Dave & Buster's and Main Event store openings in 2023.
Interest expense, net
Interest expense, net increased to $28.9 million in the third quarter of 2023 compared to $28.4 million in the third quarter of 2022 due primarily to an increase in average outstanding debt. See further discussion of the Company's debt activity at Note 6 to the consolidated financial statements.
Provision for income taxes
The effective tax rate for the third quarter of 2023 was 49.5%, compared to (11.8)% for the third quarter of 2022. The third quarter of 2023 includes favorable state apportionment impacts resulting from the acquisition of Main Event and legal entity restructuring, favorable impacts from lower permanent differences, primarily non-deductible transaction costs, and favorable impacts from credits associated with the reversal of certain tax valuation allowances.
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Thirty-Nine Weeks Ended October 29, 2023 Compared to the Thirty-Nine Weeks Ended October 30, 2022
Results of operations. The following table sets forth selected data, in millions of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying unaudited consolidated statement of comprehensive income (loss).
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | ||||||||||||||||||||||
| Entertainment revenues | $ | 1,055.9 | 65.7 | % | $ | 925.9 | 66.1 | % | |||||||||||||||
| Food and beverage revenues | 550.4 | 34.3 | % | 474.8 | 33.9 | % | |||||||||||||||||
| Total revenues | 1,606.3 | 100.0 | % | 1,400.7 | 100.0 | % | |||||||||||||||||
| Cost of entertainment (% of entertainment revenues) | 98.2 | 9.3 | % | 83.1 | 9.0 | % | |||||||||||||||||
| Cost of food and beverage (% of food and beverage revenues) | 148.5 | 27.0 | % | 138.7 | 29.2 | % | |||||||||||||||||
| Total cost of products | 246.7 | 15.4 | % | 221.8 | 15.8 | % | |||||||||||||||||
| Operating payroll and benefits | 377.5 | 23.5 | % | 333.0 | 23.8 | % | |||||||||||||||||
| Other store operating expenses | 510.4 | 31.8 | % | 430.7 | 30.7 | % | |||||||||||||||||
| General and administrative expenses | 92.0 | 5.7 | % | 98.8 | 7.1 | % | |||||||||||||||||
| Depreciation and amortization expenses | 149.9 | 9.3 | % | 120.3 | 8.6 | % | |||||||||||||||||
| Pre-opening costs | 12.7 | 0.8 | % | 10.8 | 0.8 | % | |||||||||||||||||
| Total operating costs | 1,389.2 | 86.5 | % | 1,215.4 | 86.8 | % | |||||||||||||||||
| Operating income | 217.1 | 13.5 | % | 185.3 | 13.2 | % | |||||||||||||||||
| Interest expense, net | 92.5 | 5.8 | % | 56.9 | 4.1 | % | |||||||||||||||||
| Loss on debt refinancing | 11.2 | 0.7 | % | 1.5 | 0.1 | % | |||||||||||||||||
| Income before provision for income taxes | 113.4 | 7.1 | % | 126.9 | 9.1 | % | |||||||||||||||||
| Provision for income taxes | 22.6 | 1.4 | % | 28.9 | 2.1 | % | |||||||||||||||||
| Net income | $ | 90.8 | 5.7 | % | $ | 98.0 | 7.0 | % | |||||||||||||||
| Company-owned stores at end of period | 214 | 200 | |||||||||||||||||||||
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Reconciliations of Non-GAAP Financial Measures
Adjusted EBITDA
The following table reconciles (in millions of dollars and as a percent of total revenues) Net income to Adjusted EBITDA for the periods indicated:
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | ||||||||||||||||||||||
| Net income | $ | 90.8 | 5.7 | % | $ | 98.0 | 7.0 | % | |||||||||||||||
| Interest expense, net | 92.5 | 56.9 | |||||||||||||||||||||
| Loss on debt refinancing | 11.2 | 1.5 | |||||||||||||||||||||
| Provision for income taxes | 22.6 | 28.9 | |||||||||||||||||||||
| Depreciation and amortization expense | 149.9 | 120.3 | |||||||||||||||||||||
| EBITDA | 367.0 | 22.8 | % | 305.6 | 21.8 | % | |||||||||||||||||
| Loss on asset disposal | 1.6 | 0.6 | |||||||||||||||||||||
Impairment of long-lived assets (1) | 1.7 | 1.8 | |||||||||||||||||||||
Share-based compensation (2) | 15.4 | 11.5 | |||||||||||||||||||||
Transaction and integration costs (3) | 9.6 | 22.3 | |||||||||||||||||||||
System implementation costs (4) | 6.2 | — | |||||||||||||||||||||
Consulting costs (5) | 2.0 | — | |||||||||||||||||||||
| Other items, net | 0.4 | 0.2 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 403.9 | 25.1 | % | $ | 342.0 | 24.4 | % | |||||||||||||||
(1)Amount for the thirty-nine weeks ended October 29, 2023 included property and equipment that was removed from service and recorded in other store operating expenses on the consolidated statement of comprehensive income (loss). Amount for the thirty-nine weeks ended October 30, 2022 related to Main Event’s corporate headquarters lease, which was abandoned, and was included in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(2)Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(3)Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(4)System implementation costs represent expenses incurred related to the development of new enterprise resource planning, human capital management and inventory software for our stores and store support teams. These charges are primarily recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(5)Represents one-time, third-party consulting fees that are not part of our ongoing operations and were incurred to execute two related, discrete, and project-based strategic initiatives aimed at transforming our marketing strategy, which are included in general and administrative expenses on the consolidated statement of comprehensive income (loss). The transformative nature, narrow scope, and limited duration of these incremental consulting fees are not reflective of the ordinary course expenses incurred to operate our business.
Store Operating Income Before Depreciation and Amortization
The following table reconciles (in millions of dollars and as a percent of total revenues) Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | ||||||||||||||||||||||
| Operating income | $ | 217.1 | 13.5 | % | $ | 185.3 | 13.2 | % | |||||||||||||||
| General and administrative expenses | 92.0 | 98.8 | |||||||||||||||||||||
| Depreciation and amortization expense | 149.9 | 120.3 | |||||||||||||||||||||
| Pre-opening costs | 12.7 | 10.8 | |||||||||||||||||||||
| Store Operating Income Before Depreciation and Amortization | $ | 471.7 | 29.4 | % | $ | 415.2 | 29.6 | % | |||||||||||||||
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Capital Additions
The table below reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives (“Payments from landlords”).
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | ||||||||||
| New store and operating initiatives | $ | 156.2 | $ | 116.7 | |||||||
| Games | 13.5 | 22.2 | |||||||||
| Maintenance | 45.8 | 23.0 | |||||||||
| Total capital additions | $ | 215.5 | $ | 161.9 | |||||||
| Payments from landlords | $ | 13.1 | $ | 28.6 | |||||||
Results of Operations
Revenues
Selected revenue and store data (in millions except for store operating weeks) for the periods indicated are as follows:
| Thirty-Nine Weeks Ended | |||||||||||||||||
| October 29, 2023 | October 30, 2022 | Change | |||||||||||||||
| Total revenues | $ | 1,606.3 | $ | 1,400.7 | $ | 205.6 | |||||||||||
| Total store operating weeks | 8,192 | 6,663 | 1,529 | ||||||||||||||
| Comparable store revenues | $ | 1,121.9 | $ | 1,195.4 | $ | (73.5) | |||||||||||
| Comparable store operating weeks | 5,499 | 5,499 | — | ||||||||||||||
| Noncomparable store revenues—Dave & Buster’s | $ | 107.8 | $ | 55.7 | $ | 52.1 | |||||||||||
| Noncomparable store operating weeks—Dave & Buster’s | 497 | 228 | 269 | ||||||||||||||
| Noncomparable store revenues—Main Event | 379.9 | 158.2 | 221.7 | ||||||||||||||
| Noncomparable store operating weeks—Main Event | 2,196 | 936 | 1,260 | ||||||||||||||
| Other revenues and deferrals | $ | (3.3) | $ | (8.6) | $ | 5.3 | |||||||||||
Revenue mix by category, as a percentage of total revenues, for the periods indicated was as follows:
| Thirty-Nine Weeks Ended | |||||||||||
| October 29, 2023 | October 30, 2022 | ||||||||||
| Entertainment revenues | 65.7 | % | 66.1 | % | |||||||
| Food revenues | 23.1 | % | 23.1 | % | |||||||
| Beverage revenues | 11.2 | % | 10.8 | % | |||||||
Total revenues increased $205.6 million, or 14.7%, to $1,606.3 in the thirty-nine weeks ended October 29, 2023 compared to $1,400.7 million in the thirty-nine weeks ended October 30, 2022. The increase in revenue is primarily attributable to $221.7 million of increased revenue from our Main Event stores, which were acquired on June 29, 2022, and $52.1 million in revenue from new, noncomparable, Dave & Buster's stores, partially offset by a 6.1% decrease in comparable store sales. The decrease in comparable store revenue is due primarily to a reduction in walk-in transaction counts relative to the robust consumer environment of the prior year period, partially offset by increases in food and beverage prices and increases in special event bookings.
Comparable entertainment revenues in the thirty-nine weeks ended October 29, 2023 decreased by $62.8 million, or 8.0%, to $724.2 million from $787.0 million in the thirty-nine weeks ended October 30, 2022. Food sales at comparable stores decreased by $13.2 million, or 4.7%, to $265.2 million in the thirty-nine weeks ended October 29, 2023 from $278.4 million in the thirty-nine weeks ended October 30, 2022. Beverage sales at comparable stores increased by $2.5 million, or
27
1.9%, to $132.5 million in the thirty-nine weeks ended October 29, 2023 from $130.0 million in the thirty-nine weeks ended October 30, 2022.
Cost of products
The total cost of products was $246.7 million for the thirty-nine weeks ended October 29, 2023 and $221.8 million for the thirty-nine weeks ended October 30, 2022. The total cost of products as a percentage of total revenues decreased to 15.4% for the thirty-nine weeks ended October 29, 2023 compared to 15.8% for the thirty-nine weeks ended October 30, 2022.
Cost of entertainment increased to $98.2 million in the thirty-nine weeks ended October 29, 2023 compared to $83.1 million in the thirty-nine weeks ended October 30, 2022. The cost of entertainment, as a percentage of entertainment revenues, increased to 9.3% for the thirty-nine weeks ended October 29, 2023 from 9.0% in the thirty-nine weeks ended October 30, 2022.
Cost of food and beverage products increased to $148.5 million for the thirty-nine weeks ended October 29, 2023 compared to $138.7 million for the thirty-nine weeks ended October 30, 2022. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased to 27.0% for the thirty-nine weeks ended October 29, 2023 from 29.2% for the thirty-nine weeks ended October 30, 2022. The decrease was primarily attributable to food and beverage menu price increases, continued supply chain and ingredient optimization, and the mix of products sold with our new menu.
Operating payroll and benefits
Total operating payroll and benefits increased to $377.5 million in the thirty-nine weeks ended October 29, 2023 compared to $333.0 million in the thirty-nine weeks ended October 30, 2022. The total cost of operating payroll and benefits as a percentage of total revenues was 23.5% in the thirty-nine weeks ended October 29, 2023 compared to 23.8% in the thirty-nine weeks ended October 30, 2022. This decrease is primarily due to labor management efficiencies and lower incentive compensation, partially offset by hourly wage rate and manager salary increases.
Other store operating expenses
Other store operating expenses increased to $510.4 million in the thirty-nine weeks ended October 29, 2023 compared to $430.7 million in the thirty-nine weeks ended October 30, 2022. The increase is primarily due to the additional store operating hours related to our Main Event stores, the impact of Dave & Buster’s new store openings, as well as higher occupancy costs, maintenance, security, cleaning services and marketing costs. Other store operating expense as a percentage of total revenues increased to 31.8% in the thirty-nine weeks ended October 29, 2023 compared to 30.7% in the thirty-nine weeks ended October 30, 2022. This increase in expense as a percentage of total revenues was primarily due to increased occupancy and marketing costs.
General and administrative expenses
General and administrative expenses decreased to $92.0 million in the thirty-nine weeks ended October 29, 2023 compared to $98.8 million in the thirty-nine weeks ended October 30, 2022. The decrease in general and administrative expenses was driven primarily by $22.3 million of transaction and integration costs during the prior year period and lower incentive compensation in the current year, partially offset by higher stock based compensation expense, system implementation and consulting costs. General and administrative expenses as a percentage of total revenues decreased to 5.7% in the thirty-nine weeks ended October 29, 2023 compared to 7.1% in the thirty-nine weeks ended October 30, 2022 due primarily to the reasons noted above.
Depreciation and amortization expense
Depreciation and amortization expense increased to $149.9 million in the thirty-nine weeks ended October 29, 2023 compared to $120.3 million in the thirty-nine weeks ended October 30, 2022, primarily due to the acquired Main Event stores.
Pre-opening costs
Pre-opening costs increased to $12.7 million in the thirty-nine weeks ended October 29, 2023 compared to $10.8 million in the thirty-nine weeks ended October 30, 2022 primarily related to growth in the pipeline of new store openings in the thirty-nine weeks ended October 29, 2023 compared to the thirty-nine weeks ended October 30, 2022.
28
Interest expense, net
Interest expense, net increased to $92.5 million in the thirty-nine weeks ended October 29, 2023 compared to $56.9 million in the thirty-nine weeks ended October 30, 2022 due primarily to an increase in average outstanding debt. See further discussion of the Company's debt activity at Note 6 to the consolidated financial statements.
Loss on debt refinancing
Loss on debt refinancing was $11.2 million in the thirty-nine weeks ended October 29, 2023 and $1.5 million in the thirty-nine weeks ended October 30, 2022. These amounts are related to the debt refinancing in June 2023 and June 2022, respectively. See further discussion of the Company's debt activity at Note 6 to the consolidated financial statements.
Provision for income taxes
The effective tax rate for the thirty-nine weeks ended October 29, 2023 was 19.9%, compared to 22.9% for the thirty-nine weeks ended October 30, 2022. The current year tax provision includes a favorable state apportionment impact resulting from the acquisition of Main Event and legal entity restructuring as well as lower permanent differences, primarily non-deductible transaction costs as compared to the prior year and credits associated with the reversal of certain tax valuation allowances.
29
Liquidity and Capital Resources
Debt
In connection with the closing of the Main Event Acquisition on June 29, 2022, D&B Inc entered into a senior secured credit agreement, which refinanced the $500.0 million existing revolving facility, extended the maturity date to June 29, 2027, and added a new term loan facility in the aggregate principal amount of $850.0 million, with a maturity date of June 29, 2029 (“Credit Facility”). The proceeds of the term loan, net of an original issue discount of $42.5 million, were used to pay the consideration for the Acquisition. The revolving credit facility can expire before the stated maturity date if the aggregate outstanding principal amount of the 7.625% senior secured notes (described below) exceeds $100.0 million 91 days prior to November 1, 2025. A portion of the revolving facility not to exceed $35.0 million is available for the issuance of letters of credit.
On June 30, 2023, D&B Inc entered into the Amendment with its banking syndicate, which amended the Credit Facility. The Amendment provides for a new tranche of term loans in an aggregate principal amount of $900.0 (the “2023 Term B Loans”) which consist of $843.6 of 2023 refinancing Term B Loans which refinanced in full the term loans outstanding immediately prior to the Amendment effective date and $56.4 of 2023 additional Term B Loans, which will be used for general corporate and working capital purposes. The 2023 Term B Loans were issued with an original issue discount of 1%, reduced the interest rate margin applicable to term loans and revolving loans outstanding under the Credit Agreement by 1.25% and otherwise have terms substantially the same as the terms of the existing Term B Loans under the June 29, 2022 Credit Facility. The 2023 Term B Loans may be prepaid at any time, without premium or penalty, but are subject to a prepayment premium of 1.00% (subject to certain exceptions) if certain refinancing of, or amendment to, reduce the all-in-yield of the 2023 Term B Loans is made at any time during the first six months after the Amendment effective date.
The 2023 Term B Loans bear interest at Term SOFR (plus an additional credit spread adjustment of 0.10%) or ABR (each, as defined in the amended Credit Agreement) plus (i) in the case of Term SOFR loans, 3.75% per annum and (ii) in the case of ABR loans, 2.75% per annum. The Revolving Loans bear interest subject to a pricing grid based on the Borrower’s net total leverage, at Term SOFR (plus an additional credit spread adjustment of 0.10%) plus a spread ranging from 3.00% to 3.50% per annum or ABR plus a spread ranging from 2.00% to 2.50% per annum. Unused commitments under the revolving facility incur initial commitment fees of 0.30% to 0.50%.
As of October 29, 2023, we had letters of credit outstanding of $9.8 million and an unused commitment balance of $490.2 under the revolving facility. The Credit Facility may be increased through incremental facilities, by an amount equal to the greater of (i) $400.0 million and (ii) 0.75 times trailing twelve-month Adjusted EBITDA, as defined, plus additional amounts subject to compliance with applicable leverage ratio and/or interest coverage ratio requirements. The Credit Facility is unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries.
During fiscal 2020, the Company issued $550.0 million aggregate principal amount of 7.625% senior secured notes (the “Notes”). Interest on the Notes is payable in arrears on November 1 and May 1 of each year. The Notes mature on November 1, 2025, unless earlier redeemed, and are subject to the terms and conditions set forth in the related indenture. The Notes were issued by D&B Inc and are unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries. During fiscal 2022, the Company redeemed a total of $110.0 million outstanding principal amount of the Notes. Beginning October 27, 2022, the Company may elect to further redeem the Notes, in whole or in part, at certain specified redemption prices, plus accrued and unpaid interest, at the redemption date.
The Company’s weighted average effective interest rate on our total debt facilities was 10.3% and 9.5% for the thirty-nine weeks ended October 29, 2023 and October 30, 2022, respectively.
Our debt agreements contain restrictive covenants that, among other things, place certain limitations on our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, pay dividends, acquire other businesses or sell assets. The Credit Facility also requires the Company to maintain a maximum net total leverage ratio, as defined, as of the end of each fiscal quarter, beginning with the Company’s first full fiscal quarter after the Closing Date. We were in compliance with our covenants and the terms of our debt agreements as of October 29, 2023.
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Sale-Leaseback
In October 2023, the Company entered into a sale and master lease agreement (a "sale-leaseback") with an unrelated third party. Under these agreements, the Company sold four of its store properties, including land, buildings and certain improvements, and then leased the assets back through the sale-leaseback transaction. As of October 29, 2023 the current outstanding liability of $0.2 million was recorded in accrued liabilities and the long term outstanding liability of $84.0 million was recorded in other liabilities on the consolidated balance sheet related to the financing liability. See further discussion at Note 5 to the consolidated financial statements.
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Credit Adjusted EBITDA and Net Total Leverage Ratio.
Credit Adjusted EBITDA, a non-GAAP measure, represents Adjusted EBITDA plus certain other items as defined in our Credit Facility. See further discussion at Non-GAAP Financial Measures above. The following table reconciles Net income to Credit Adjusted EBITDA, as defined in our Credit Facility for the periods indicated:
| Trailing Four Quarters Ended October 29, 2023 | |||||
| Net income (loss) | $129.9 | ||||
| Add back: | |||||
| Interest expense, net | 123.0 | ||||
| Loss on debt refinancing | 11.2 | ||||
| Provision for (benefit from) income taxes | 30.2 | ||||
| Depreciation and amortization expense | 198.9 | ||||
| EBITDA | 493.2 | ||||
| Add back: | |||||
| Loss on asset disposal | 1.8 | ||||
Impairment of long-lived assets (1) | 1.7 | ||||
Share-based compensation (2) | 23.9 | ||||
Transaction and integration costs (3) | 12.5 | ||||
System implementation costs (4) | 6.8 | ||||
Consulting costs (5) | 2.0 | ||||
Pre-opening costs (6) | 16.5 | ||||
Entertainment revenue deferrals (7) | 10.1 | ||||
| Other items, net | 0.4 | ||||
| Credit Adjusted EBITDA, a non-GAAP measure | $568.9 | ||||
(1)Amount includes property and equipment that was removed from service and recorded in other store operating expenses on the consolidated comprehensive income statement.
(2)Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(3)Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(4)System implementation costs represent expenses incurred related to the development of new enterprise resource planning, human capital management and inventory software for our stores and store support teams. These charges are primarily recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(5)Represents one-time, third-party consulting fees that are not part of our ongoing operations and were incurred to execute two related, discrete, and project-based strategic initiatives aimed at transforming our marketing strategy, which are included in general and administrative expenses on the consolidated statement of comprehensive income (loss). The transformative nature, narrow scope, and limited duration of these incremental consulting fees are not reflective of the ordinary course expenses incurred to operate our business.
(6)Represents costs incurred, primarily consisting of occupancy and payroll related expenses, associated with the opening of new stores. These costs are considered a "cost of new projects" as defined in our Credit Facility.
(7)Represents non-cash adjustments to our deferred entertainment revenue liabilities. These costs are considered an "other non-cash charge" as defined in our Credit Facility.
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The Company's maximum permitted Net Total Leverage Ratio, as defined in our Credit Facility, is 3.5x. The following table calculates Net Total Leverage Ratio as of and for the period indicated:
| As Of And For The Trailing Four Quarters Ended October 29, 2023 | |||||
| Credit Adjusted EBITDA (a) | $568.9 | ||||
Total debt (1) | $1,374.5 | ||||
| Less: Cash and cash equivalents | $(64.0) | ||||
| Add: Outstanding letters of credit | $9.8 | ||||
| Net debt (b) | $1,320.3 | ||||
| Net Total Leverage Ratio (b / a) | 2.3 | x | |||
(1) Amount represents the face amount of debt outstanding, net unamortized debt issuance costs and debt discount, and the outstanding lease financing payable as a result of a sale-leaseback transaction. See further discussion at Note 5 to the consolidated financial statements.
Dividends and Share Repurchases
On March 27, 2023, our Board of Directors approved a share repurchase program with an authorization limit of $100.0. On April 19, 2023, our Board of Directors approved an increase to the authorization limit of $200.0 for a total of $300.0 authorized under the program. On September 4, 2023 our Board of Directors approved an increase to the authorization limit of $100.0 for a total of $400.0 authorized under the program. During the thirty-nine weeks ended October 29, 2023, the Company repurchased 8.49 million shares at an average of $35.35 per share. The remaining dollar value of shares that may be repurchased under the program is $100.0 as of October 29, 2023.
There were no dividends declared or paid during the thirteen and thirty-nine weeks ended October 29, 2023. Future decisions to pay cash dividends or repurchase shares continue to be at the discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements, compliance with debt agreements and other factors that the Board of Directors considers relevant.
Cash and Cash Equivalents
As of October 29, 2023, the Company had cash and cash equivalents of $64.0 million. The Company can operate with a working capital deficit because cash from sales is usually received before related liabilities for product supplies, labor and services become due. Our operations do not require significant inventory or receivables and we continually invest in our business through the growth of stores and operating improvement additions, which are reflected as non-current assets and not a part of working capital. Based on our current business plan, we believe our cash and cash equivalents combined with expected cash flows from operations, available borrowings under our revolving credit facility and expected payments from landlords should be sufficient not only for our operating requirements but also to enable us, in the aggregate, to finance our capital allocation strategy, including capital expenditures, through at least the next twelve months.
Cash Flow Activity
Operating Activities — Cash flow from operations typically provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, team member compensation, operations, occupancy, and other operating costs. Cash from operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, the timing of cash receipts and payments, and vendor payment terms.
Cash flow from operating activities decreased to $267.0 million for the thirty-nine weeks ended October 29, 2023 compared to $301.0 million for the thirty-nine weeks ended October 30, 2022. The decrease was primarily driven by the timing of changes in working capital.
Investing Activities — Cash flow used in investing decreased to $207.2 million for the thirty-nine weeks ended October 29, 2023 from $981.9 million for the thirty-nine weeks ended October 30, 2022 primarily due to the $818.7 net cash paid for the acquisition of Main Event in the thirty-nine weeks ended October 30, 2022, partially offset by an increase in capital expenditures.
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Financing Activities — Cash flow used in financing was $177.4 million in the thirty-nine weeks ended October 29, 2023 primarily consisting of share repurchases and payments on outstanding debt and revolver balances, partially offset by net debt proceeds and proceeds from a sale-leaseback transaction. Cash flow from financing activities of $763.2 million in the thirty-nine weeks ended October 30, 2022 primarily consisted of net debt proceeds, partially offset by share repurchases, payments on revolver balances and debt issuance costs incurred.
Contractual Obligations and Commitments
Other than the activity discussed at Debt and Sale-Leaseback above, there have been no material changes to our contractual obligations since January 29, 2023, as reported on Form 10-K filed with the SEC on March 28, 2023.
Accounting policies and estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosures of contingent assets and liabilities. These estimates and assumptions affect amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the date of the consolidated financial statements. Our current estimates are subject to change if different assumptions as to the outcome of future events were made. We evaluate our estimates and judgments on an ongoing basis, and we adjust our assumptions and judgments when facts and circumstances dictate. Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates we used in preparing the accompanying consolidated financial statements. A complete description of our critical accounting policies and estimates is included in our annual consolidated financial statements and the related notes in our Annual Report on Form 10-K for the fiscal year ended January 29, 2023.
Recent accounting pronouncements
Refer to Note 1 to the Unaudited Consolidated Financial Statements for information regarding new accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
We are exposed to market price fluctuation in food, beverage, supplies and other costs such as energy. Given the historical volatility of certain of our food product prices, including proteins, seafood, produce, dairy products, and cooking oil, these fluctuations can materially impact our food costs. While our purchasing commitments partially mitigate the risk of such fluctuations, there is no assurance that supply and demand factors such as disease or inclement weather will not cause the prices of the commodities used in our restaurant operations to fluctuate. Additionally, the cost of purchased materials may be influenced by tariffs and other trade regulations which are outside of our control. To the extent that we do not pass along cost increases to our customers, our results of operations may be adversely affected.
Interest Rate Risk
In the second quarter of fiscal 2022, the Company elected SOFR as the alternative base rate for outstanding borrowings on the Credit Facility, which is based on variable rates. As of October 29, 2023, the Company had no balance outstanding on our revolving facility and an outstanding balance of $900.0 million on the term loan facility. The impact on our annual results of operations of a hypothetical one percentage point interest rate change on the outstanding balance of the credit facility as of October 29, 2023 would be approximately $9.0 million.
Inflation
Severe increases in inflation could affect the United States or global economies and have an adverse impact on our business, financial condition and results of operation. If several of the various costs in our business experience inflation at the same time, such as commodity price increases beyond our ability to control and increased labor costs, we may not be able to adjust prices to sufficiently offset the effect of the various cost increases without negatively impacting consumer demand.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules
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13a-15 and 15d-15 promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
The Company implemented a new human resources information system (“HRIS”) during the third quarter ended October 29, 2023, which had a material impact on internal control over financial reporting. The Company will include the new HRIS in our evaluation of internal control over financial reporting for the fiscal year ending February 4, 2024. There were no other changes to our internal control over financial reporting practices or processes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during our third quarter ended October 29, 2023.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is incorporated by reference from Note 7 to our Unaudited Consolidated Financial Statements set forth in Part I of this report.
Item 1A. Risk Factors
See discussion in “Risk Factors” in Item 1A of the Company's Annual Report on Form 10-K for the year ended January 29, 2023.
Item 2. Unregistered Sales of Equity Securities
Information regarding repurchase of our common stock, in millions, except per share amounts, during the thirty-nine weeks ended October 29, 2023:
Period (1) | Total Number of Shares Repurchased (2) (in millions) | 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 | — | $ | — | 5.70 | $ | 100.0 | ||||||||||||||||||||
| July 3 to July 30, 2023 | — | $ | — | 5.70 | $ | 100.0 | ||||||||||||||||||||
| July 31 to August 27, 2023 | — | $ | — | 5.70 | $ | 100.0 | ||||||||||||||||||||
| August 28 to October 1, 2023 | 2.79 | $ | 35.84 | 8.49 | $ | 100.0 | ||||||||||||||||||||
| October 2 to October 29, 2023 | — | $ | — | 8.49 | $ | 100.0 | ||||||||||||||||||||
(1)The Company uses a "4-5-4" calendar to determine the months in each quarter. The periods presented represent the 4 week and 5 week periods making up the thirty-nine weeks ended October 29, 2023.
(2)Represents cumulative shares repurchased under repurchase program(s). Excludes shares withheld for tax purposes on behalf of our employees in connection with the vesting of time-based and performance restricted stock units totaling 0.03 for the thirty-nine weeks ended October 29, 2023.
(3)Our Board of Directors approved a share repurchase program in March of 2023, with approved increases in April and September of 2023 (see further discussion at Note 8 to our unaudited consolidated financial statements). Under the program, the Company may repurchase shares on the open market, through privately negotiated transactions, and through trading plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The share repurchase program(s) may be modified, suspended or discontinued at any time.
(4)Represents total cumulative share repurchase authorizations in effect, less cumulative purchases, at the end of each period presented.
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Item 6. Exhibits
| Exhibit Number | Description | |||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1* | ||||||||
| 32.2* | ||||||||
| 101.INS | Inline XBRL Inline Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH | Inline XBRL Inline Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Inline Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Inline Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Inline Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Inline Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | |||||||
__________________
*Filed herein
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DAVE & BUSTER’S ENTERTAINMENT, INC., a Delaware corporation | ||||||||
Date: December 5, 2023 | By: | /s/ Christopher Morris | ||||||
| Christopher Morris | ||||||||
| Chief Executive Officer | ||||||||
Date: December 5, 2023 | By: | /s/ Michael A. Quartieri | ||||||
| Michael A. Quartieri | ||||||||
| Chief Financial Officer | ||||||||
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Exhibit 31.1
CERTIFICATION
I, Christopher Morris, Chief Executive Officer of Dave & Buster’s Entertainment, Inc., certify that:
1.I have reviewed this quarterly report on Form 10-Q of Dave & Buster’s Entertainment, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: December 5, 2023 | /s/ Christopher Morris | ||||
| Christopher Morris | |||||
| Chief Executive Officer | |||||
Exhibit 31.2
CERTIFICATION
I, Michael A. Quartieri, Chief Financial Officer of Dave & Buster’s Entertainment, Inc., certify that:
1.I have reviewed this quarterly report on Form 10-Q of Dave & Buster’s Entertainment, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s third fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: December 5, 2023 | /s/ Michael A. Quartieri | ||||
| Michael A. Quartieri | |||||
| Chief Financial Officer | |||||
Exhibit 32.1
CERTIFICATION
In connection with the Quarterly Report of Dave & Buster’s Entertainment, Inc. (the “Company”) on Form 10-Q for the period ended October 29, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher Morris, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that:
(1)The Report fully complies with the applicable requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: December 5, 2023
| /s/ Christopher Morris | |||||
| Christopher Morris | |||||
| Chief Executive Officer | |||||
Exhibit 32.2
CERTIFICATION
In connection with the Quarterly Report of Dave & Buster’s Entertainment, Inc. (the “Company”) on Form 10-Q for the period ended October 29, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Quartieri, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that:
(1)The Report fully complies with the applicable requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: December 5, 2023
| /s/ Michael A. Quartieri | |||||
| Michael A. Quartieri | |||||
| Chief Financial Officer | |||||