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

ITEM 7.    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 our audited consolidated financial statements and related notes included herein. This discussion may contain forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements and Risk Factors for a discussion of the uncertainties and risks associated with these statements. 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 consolidated financial statements. All dollar amounts are presented in millions, unless otherwise noted, except per share amounts.

Financial Highlights

•Revenue of $2,132.7 million decreased 3.3% compared with $2,205.3 million in fiscal 2023.

•Comparable store sales decreased 7.2% on a like-for-like calendar basis compared to fiscal 2023. See further discussion of comparable store sales below at Revenues.

•Net income totaled $58.3 million, or $1.46 per diluted share, compared with net income of $126.9 million, or $2.88 per diluted share in fiscal 2023.

•Adjusted EBITDA decreased $49.4 million to $506.2 million, or 23.7% of revenues, compared with Adjusted EBITDA of $555.6 million, or 25.2% of revenues, in fiscal 2023. See further discussion of Adjusted EBITDA, a non-GAAP measure, at Non-GAAP Financial Measures below along with a reconciliation to net income, the most comparable GAAP measure, at Reconciliations of Non-GAAP Financial Measures below.

•The Company’s fiscal year consists of 52 or 53 weeks ending on the Tuesday after the Monday closest to January 31. Fiscal 2024 contained 52 weeks, while Fiscal 2023 contained 53 weeks. The 53rd week of Fiscal 2023 contributed approximately $39.5 million in revenue.

General

We are a leading owner and operator of high-volume venues primarily in North America that combine entertainment and dining for both adults and families under the “Dave & Buster’s” and “Main Event” brands. The core of our concept is to offer our customers various forms of entertainment along with quality dining 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 teenagers. 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 37,000 square feet and range in size between 16,000 and 70,000 square feet. Our Main Event stores average 53,000 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.

Strategy

Our strategy is built on the following key initiatives:

•Offer the latest entertainment at competitive prices.

•Offer novel food & drink to bring people together.

•Drive customer engagement through strategic marketing and loyalty offerings.

•Optimize our footprint with new venues and refreshed existing locations.

•Drive incremental sales volume through advertising and hosting special events.

•Drive an improved customer experience and optimize operations through targeted technology investments.

For further information about our strategy, refer to “Item 1. Strategy.”

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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 owned and open for a full 18 months before the beginning of the fiscal year and excluding stores permanently closed during the period. For fiscal 2024, our comparable store base consists of 146 Dave & Buster's branded stores and 49 Main Event branded stores.

New store openings. Our ability to reach new customers is influenced by the opening of additional stores in 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. During fiscal 2024, we opened eleven new Dave & Buster's stores and three Main Event stores.

Non-GAAP Financial Measures

In addition to the results provided in accordance with 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, Credit Adjusted EBITDA and Store Operating Income Before Depreciation and Amortization (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 that 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, Credit Adjusted EBITDA or Store Operating Income Before Depreciation and Amortization in isolation and also uses other measures, such as revenues, gross margin, operating income and net income to measure operating performance.

Adjusted EBITDA

We define “Adjusted EBITDA” as net income, plus interest expense, net, loss on debt refinancing, provision for (benefit from) income taxes, depreciation and amortization expense, (gain) loss on property and equipment transactions, impairment of long-lived assets, share-based compensation, currency transaction (gains) losses and other costs.

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 net income plus certain items as defined at Adjusted EBITDA above, as well as certain other adjustments as defined in our Credit Facility (see Liquidity and Capital Resources below for additional discussion and reconciliation). These other adjustments include (i) increases in 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.

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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, plus depreciation and amortization expense, general and administrative expenses and pre-opening costs. Store Operating Income Before Depreciation and Amortization 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, pre-opening costs and other charges and gains, 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

The Company’s fiscal year consists of 52 or 53 weeks ending on the Tuesday after the Monday closest to January 31. Fiscal year 2024, which ended on February 4, 2025, contained 52 weeks. Fiscal year 2023, which ended on February 4, 2024, contained 53 weeks. Fiscal year 2022, which ended on January 29, 2023, contained 52 weeks. Each quarterly period has 13 weeks, except in a 53-week year, when the fourth quarter has 14 weeks.

On May 6, 2024, the first day of the 2nd quarter of fiscal 2024, the Company changed its fiscal year to end on the Tuesday after the Monday closest to January 31st. The change was made to improve labor and operational efficiencies by ending the Company's periods outside of the busier weekend timeframe. As a result of this change, the second quarter and fiscal 2024 have two additional days added to its normal 13-week quarter and 52-week year.

All dollar amounts are presented in millions, unless otherwise noted, except share and 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 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 have historically fluctuated due to seasonal factors. Typically, we have higher revenues associated with the spring and year-end holidays, and sales and customer traffic during these periods are susceptible to the impact of severe, unfavorable or unseasonably mild weather. Our third quarter, which encompasses the back-to-school fall season, has historically had lower revenues as compared to other quarters.

We expect 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.

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Fiscal 2024 Compared to Fiscal 2023

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 Consolidated Statements of Comprehensive Income.

Note that the Company’s fiscal year consists of 52 or 53 weeks ending on the Tuesday after the Monday closest to January 31. Fiscal year 2024 contained 52 weeks while Fiscal year 2023 contained 53 weeks.

(1)All revenues and costs are expressed as a percentage of total revenues for the respective period presented, except cost of entertainment, which is expressed as a percentage of entertainment revenues, and cost of food and beverage, which is expressed as a percentage of food and beverage revenues.

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Reconciliations of Non-GAAP Financial Measures

Adjusted EBITDA

The following table reconciles Net income to Adjusted EBITDA (in millions of dollars and as a percent of total revenues) for the periods indicated:

(1)All percentages are expressed as a percentage of total revenues for the respective period presented.

(2)Non-cash share-based compensation expense, net of forfeitures, recorded in “General and administrative expenses” on the Consolidated Statement of Comprehensive Income.

(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.

(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 and staff augmentation for the implementation team at the store support center. These charges are primarily recorded in “Other charges and gains” on the Consolidated Statement of Comprehensive Income.

(5)The amount related to fiscal 2024 primarily consisted of $10.6 million of one-time, third-party consulting fees, $3.9 million of impairment of long-lived assets, and a $12.8 million loss on property and equipment transactions. The amount for the 2023 primarily consisted of one-time, third-party consulting fees. The third-party consulting fees for each period, which are recorded in “Other charges and gains” on the Consolidated Statements of Comprehensive Income, are not part of our ongoing operations and were incurred to execute, discrete, and project-based strategic initiatives aimed at transforming our marketing strategy and transform our supply chain operational efficiency. 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 Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:

(1)All percentages are expressed as a percentage of total revenues for the respective period presented.

(2)Certain fiscal 2023 amounts were reclassified to align with the fiscal 2024 presentation. See Note 1 to the consolidated financial statements for further discussion.

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Results of Operations

Revenues - Selected revenue data (in millions except for store operating weeks) and store data for the periods indicated are as follows:

(1)During fiscal 2024 we adjusted our period close from Sunday to Tuesday of each week (see further discussion at Note 1 of the consolidated financial statements). This adjustment had the effect of adding 56, 9, and 65 operating weeks for our comparable, noncomparable and total stores, respectively.

(2)In fiscal 2023, comparable store operating weeks, noncomparable store operating weeks and total store operating weeks included an additional 195, 25 and 220 operating weeks, respectively, due to the 53rd week.

(3)Includes changes in deferred entertainment revenues, gift card deferrals and certain other revenues not associated with stores.

The table below represents our revenue mix for the fiscal periods indicated:

Total revenues decreased $72.6 million, or 3.3%, to $2,132.7 million in fiscal 2024 compared to $2,205.3 million in fiscal 2023. The decrease in revenue is primarily attributable to the 53rd week of fiscal 2023, a 7.2% decrease in comparable store sales on a like-for-like calendar basis and a decrease in other noncomparable revenues, partially offset by incremental sales from new stores, and changes in deferred entertainment revenue. The decrease in comparable store revenues is due primarily to a reduction in demand relative to a more robust consumer environment in the prior year period. The changes in entertainment revenue deferrals reflect breakage on unredeemed game play credits and tickets corresponding to guest redemption patterns over time. See Revenue Recognition at Note 1 of the consolidated financial statements for discussion of revenue recognition associated with play credits and tickets.

The $180.0 million or 8.9% comparable store revenue decrease presented in the table above is on a fiscal period basis. On a like-for-like calendar basis, comparable store sales decreased 7.2%. Due to the 53rd week in fiscal 2023, the 2024 period had one less operating week than fiscal 2023 and it ended approximately one week earlier than the 2023 period. Additionally, fiscal 2024 included two additional days of revenue, partially offsetting the one-week differential discussed in the footnote to the table above. Comparable store revenues based on a like-for-like calendar basis adjusts for this shift in weeks and compares the period from February 5, 2024 through February 4, 2025 to the period from January 29, 2023 through February 4, 2024.

Cost of products - The total cost of products was $314.4 million for fiscal 2024 and $353.0 million for fiscal 2023. The total cost of products as a percentage of total revenues decreased to 14.7% for fiscal 2024 compared to 16.0% for fiscal 2023.

Cost of entertainment decreased to $118.6 million in fiscal 2024 compared to $138.5 million in fiscal 2023. The cost of entertainment, as a percentage of entertainment revenues, decreased to 8.5% for fiscal 2024 from 9.7% in the fiscal 2023. The decrease was primarily attributable to sales price increases.

Cost of food and beverage products decreased to $195.8 million for fiscal 2024 compared to $214.5 million for fiscal 2023. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased to 26.4% for fiscal 2024 from 27.8% for fiscal 2023. The slight decrease was due to food and beverage menu price increases, and the mix of products sold with our new menu, offset by continued supply chain and ingredient optimization.

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Operating payroll and benefits - Total operating payroll and benefits decreased to $523.5 million in fiscal 2024 compared to $525.9 million in fiscal 2023. The total cost of operating payroll and benefits as a percentage of total revenues was 24.5% in fiscal 2024 compared to 23.8% in fiscal 2023.

Other store operating expenses - Other store operating expenses increased to $690.4 million in fiscal 2024 compared to $669.5 million in fiscal 2023. Other store operating expense as a percentage of total revenues increased to 32.4% in fiscal 2024 compared to 30.4% in fiscal 2023. This increase in expense as a percentage of total revenues was primarily due to higher occupancy costs for new stores and repairs & maintenance costs.

General and administrative expenses - General and administrative expenses decreased to $99.5 million in fiscal 2024 compared to $113.8 million in fiscal 2023. The decrease in general and administrative expenses was primarily driven by lower share-based and incentive compensation and lower transaction and integration costs in the current year. General and administrative expenses as a percentage of total revenues decreased to 4.7% in fiscal 2024 compared to 5.2% in fiscal 2023.

Depreciation and amortization expense - Depreciation and amortization expense increased to $238.2 million in fiscal 2024 compared to $208.5 million in fiscal 2023, primarily due to new store openings and store remodels.

Pre-opening costs - Pre-opening costs increased to $18.7 million in fiscal 2024 compared to $18.4 million in fiscal 2023 primarily due to the timing of costs in our pipeline of new stores for each period.

Other charges and gains - Other charges and gains increased to $27.6 million in fiscal 2024 compared to $9.6 million in fiscal 2023 primarily due to increased system implementation costs, impairment charges associated with one underperforming store and loss on retirement of assets associated with assets written off related to store remodels.

Interest expense, net - Interest expense, net increased to $135.3 million in fiscal 2024 compared to $127.4 million in fiscal 2023 due primarily due to incremental interest expense associated with sale-leaseback transactions and borrowings outstanding under our Credit Agreement, partially offset by an increase in interest income and a decrease in interest rates on our Credit Facility. See further discussion of the Company's debt activity at Note 6 of the consolidated financial statements. See further discussion of the sale-leaseback transaction at Note 8 of the consolidated financial statements.

Loss on debt refinancing - Loss on debt refinancing was $15.2 million in fiscal 2024 and $16.1 million in fiscal 2023. The amount for fiscal 2024 is related to the January and November debt refinancings. See further discussion of the Company's debt refinancing activity at Note 6 of the consolidated financial statements.

Provision for income taxes - The effective tax rate for fiscal 2024 was 16.5%, compared to 22.2% for fiscal 2023. The effective tax rate decrease for fiscal 2024 in comparison to fiscal 2023 was impacted by a significant reduction in pre-tax book income. As pre-tax income decreases, the effect of certain tax attributes and permanent items, specifically our employment tax credits become more pronounced, which cause fluctuations in the effective tax rate. See further discussion of the Company's Income taxes at Note 7 of the consolidated financial statements.

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Liquidity and Capital Resources

Debt

Credit Facility

In fiscal 2022, the Company entered into a senior secured credit agreement including a revolving credit facility (the “Revolving Credit Facility”) and a term loan facility (together with the Revolving Credit Facility, the “Credit Facility”). On November 1, 2024, D&B Inc. entered into an amendment with its banking syndicate that amended the Credit Facility (the “Fourth Amendment”). 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.

The Fourth Amendment, among other things:

•provided for a new tranche of term loans in an aggregate principal amount of $700.0 million (the “Incremental Term B Loans”) with a maturity date of November 1, 2031, and

•increased the Revolving Credit Facility by $150.0 million to a total $650.0 million and extended the maturity to November 1, 2029.

The proceeds from the Incremental Term B Loans were primarily used to:

•redeem all $440.0 million of outstanding senior secured notes (see 7.625% Senior Secured Notes below), and

•pay down $200.0 million of the term loans outstanding under the Credit Facility immediately prior to the Fourth Amendment (the “Existing Term B Loans”).

Both the Existing Term B Loans and the Incremental Term B Loans bear interest at Term SOFR or ABR (each, as defined in the amended Credit Facility) plus (i) in the case of Term SOFR loans, 3.25% per annum and (ii) in the case of ABR loans, 2.25% per annum. Loans under the Revolving Credit Facility bear interest subject to a pricing grid based on net total leverage, at Term SOFR plus a spread ranging from 2.50% to 3.00% per annum or ABR plus a spread ranging from 1.50% to 2.00% per annum. Unused commitments under the Revolving Credit Facility incur initial commitment fees of 0.30% to 0.50%. Additionally, the interest rate margin applicable to the Existing Term B Loans and loans outstanding under the Revolving Credit Facility are subject to an additional 0.25% step-down if a rating of B1/B+ or higher from Moody’s and S&P is achieved (which will step-up if such rating is subsequently not maintained).

A portion of the Revolving Credit Facility not to exceed $35.0 million is available for the issuance of letters of credit. As of February 4, 2025, we had letters of credit outstanding of $11.5 million and an unused commitment balance of $503.4 million under the Revolving Credit 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 in the Credit Facility, plus additional amounts subject to compliance with applicable leverage ratio and/or interest coverage ratio requirements.

7.625% Senior Secured Notes

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 2021, the Company redeemed a total of $110.0 million outstanding principal amount of the Notes. During fiscal 2024, using the proceeds from the Fourth Amendment to the Credit Facility discussed above, the Company redeemed the remaining $440.0 million outstanding principal amount of the Notes.

Loss on debt refinancing

Term Loans — Immediately prior to the Fourth Amendment, the Company had $35.1 million of unamortized debt issuance discounts and debt issuance costs. In connection with the Fourth Amendment described above, certain lenders exited the syndicate and were replaced by new syndicate members. The term loans, in the aggregate, were increased, a portion of the term loan facility was deemed extinguished, and a portion was determined to be modified. As a result, $4.1 million of unamortized costs were written off and $8.2 million of new fees were expensed on the modified portion resulting in a total charge of $12.3 million included in “Loss on debt refinancing” on the Consolidated Statements of Comprehensive Income. The remaining unamortized issuance discounts and new issuance discount and costs immediately subsequent to the

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refinancings were deferred and are amortized into interest expense, net over the remaining term of the Existing Term B Loans and the Incremental Term B Loans.

Revolving Credit Facility — Immediately prior to the Fourth Amendment, the Company had $3.8 million of unamortized debt issuance costs. In connection with the Fourth Amendment described above, certain lenders exited the syndicate and were replaced by new syndicate members. The Revolving Credit Facility was increased in size, a portion of the Revolving Credit Facility was deemed extinguished, and a portion was determined to be modified. As a result, $0.6 million of unamortized costs were written off and included in “Loss on debt refinancing” on the Consolidated Statements of Comprehensive Income. The remaining unamortized issuance discounts and new issuance costs immediately subsequent to the refinancings were deferred and are amortized into interest expense, net over the remaining term of the Credit Facility.

The Notes — Immediately prior to paying down the Notes, the Company had $2.3 million of unamortized debt issuance costs. The Notes were deemed fully extinguished, and all such costs were included in “Loss on debt refinancing” on the Consolidated Statements of Comprehensive Income.

Interest expense

The following table sets forth our recorded interest expense, net for the periods presented:

(1)    See discussion of sale-leaseback transactions at Note 8 of the consolidated financial statements.

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. Additional adjustments include (i) entertainment revenue deferrals, (ii) the cost of new projects, including store pre-opening costs, (iii) business optimization expenses and other restructuring costs, and (iv) additional 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.

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The following table sets forth a reconciliation of Net income to Credit Adjusted EBITDA for the period shown:

(1)See discussion of share-based compensation at Adjusted EBITDA above.

(2)See discussion of transaction and integration costs at Adjusted EBITDA above.

(3)See discussion of system implementation costs at Adjusted EBITDA above.

(4)See discussion of other items, net at Adjusted EBITDA above.

(5)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.

(6)Represents other adjustments allowed under our Credit Facility in the determination of Net Total Leverage Ratio including i) amortization of software costs, ii) executive search fees, iii) public company costs and iv) estimated impact of remodels to financial performance.

The following table provides a calculation of Net Total Leverage Ratio, as defined in our Credit Facility, for the latest test period shown:

(1) Amount represents the face amount of debt outstanding, net of unamortized debt issuance costs and debt discount.

Dividends and Share Repurchases

There were no dividends declared or paid in fiscal 2024 or fiscal 2023.

On March 27, 2023, our Board approved a share repurchase program with an authorization limit of $100.0 million. Our Board has approved various increases to the repurchase program up to a total authorization limit of $600.0 million. In fiscal 2024, the Company repurchased 4.99 million shares for a total of $171.9 million. The remaining dollar value of shares available for repurchase under the program is $128.0 million as of February 4, 2025.

Future decisions to pay cash dividends or repurchase shares continue to be at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Board considers relevant.

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Cash Flow Summary

The Company ended the year with $510.4 million of liquidity, which included $6.9 million in cash and cash equivalents and $503.5 million available under the $650.0 million revolving credit facility.

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.

Operating Activities — Cash flow provided by operations typically supplies 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 used in operating activities decreased to $312.3 million in fiscal 2024 compared to $364.2 million in fiscal 2023 primarily due to a decrease in net income and the timing of changes in working capital.

Investing Activities — Cash flow used in investing activities primarily reflects capital expenditures. The Company spent $530.2 million in fiscal 2024 compared to $330.2 million in fiscal 2023. The increase is primarily due to higher capital expenditures related to store remodels and new store openings.

The following table reflects accrual-based capital additions for the periods presented: Capital additions do not include any reductions for accrual-based leasehold improvement incentives (“Payments from landlords”).

(1)     Amounts received from landlords as reimbursements for tenant improvements and included in cash provided by operating activities in the Consolidated Statements of Cash Flows.

(2)    Amounts received from landlords in sale-leaseback transactions and included in cash provided by financing activities in the Consolidated Statements of Cash Flows. See Note 8 to the consolidated to the consolidated financial statements for further discussion.

Financing Activities — Cash flow provided by financing activities in fiscal 2024 was $187.1 million primarily consisting of net debt proceeds and proceeds from sale-leaseback transactions, partially offset by transactions under the share repurchase program. Cash used in financing activities in fiscal 2023 was $179.4 million primarily attributable to transactions under the share repurchase program and debt issuance and discount costs incurred, partially offset by net debt proceeds and proceeds from a sale-leaseback transaction.

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Contractual and Other Commitments

The Company had the following obligations as of February 4, 2025:

•Long-term debt obligations, including scheduled interest payments (See Note 6 of the consolidated financial statements)

•Future minimum lease obligations under non-cancelable leases (Refer to Note 8 of the Notes to the consolidated financial statements)

•Software as a service subscription commitments of approximately $5.8 million to be paid in annual installments of approximately $1.9 million through fiscal 2028.

•Approximately $35.4 million of minimum food purchase commitments through the end of fiscal 2025.

Critical accounting policies and estimates

The above discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. 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. We made certain reclassifications of amounts in the Consolidated Statements of Comprehensive Income for fiscal years ended February 4, 2024 and January 29, 2023 to be consistent with the presentation for the fiscal year ended February 4, 2025. See Note 1 “Accounting Reclassifications”.

Our significant accounting policies are described in Note 1 of Notes to consolidated financial statements. Critical accounting policies are those that we believe are most important to portraying our financial condition and results of operations and require the greatest amount of judgment by management. Judgment or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgment that is involved in preparing the consolidated financial statements.

Accounting for entertainment operations. Entertainment revenues are primarily recognized upon utilization of game play credits on gaming cards purchased and 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 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. We estimate the amount of deferred revenue based upon credits and tickets remaining on gaming cards, historic game play credit and ticket utilization patterns and estimates of the standalone selling prices of game play credits and the customer material right. The standalone selling price of the customer material right is estimated using an equivalent chip cost plus margin approach. For purposes of recognizing revenue, the total amount collected from each customer is then allocated between the two performance obligations based on the relative standalone selling price of each obligation.

Accounting for impairment of goodwill and tradenames. We assess the recoverability of goodwill and indefinite-lived tradename assets related to our reporting units on an annual basis or more often if circumstances or events indicate impairment may exist. We may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. In considering the qualitative approach, we evaluate factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units.

If the qualitative assessment is not performed or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the fair value of the reporting unit is calculated. We determine fair value based on a combination of market-based values and discounted projected future operating cash flows of the reporting units using a risk adjusted discount rate that is commensurate with the risk inherent in our current business model. We make assumptions regarding future revenues and cash flows, expected growth rates, terminal values and other factors which could significantly impact the fair value calculations. The carrying value of the reporting unit is compared to its estimated fair value, with any excess of carrying value over fair value deemed to be an indicator of impairment. In the event that these assumptions change in the future, we may be required to record impairment charges related to goodwill.

We consider our Dave & Buster's and Main Event brands to be two reporting units within one operating segment. We performed our annual impairment test in the fourth quarter of fiscal 2024 by utilizing the qualitative approach and determined that there were no events or circumstances to indicate that it was more likely than not that the fair value of our reporting units, or the Dave & Buster's and Main Event tradenames, was less than their carrying values. For fiscal years 2024, 2023 and 2022, there was no impairment to our goodwill or tradenames. See balances of goodwill and tradenames at Note 4 to the consolidated financial statements.

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Accounting for impairment of long-lived assets. We assess the potential impairment of our long-lived assets related to each store, including property and equipment and right-of-use assets, on an annual basis or whenever events or changes in circumstances indicate that the carrying values of these assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual store level, since this is the lowest level of identifiable cash flows and primarily includes an assessment of historical cash flows and other relevant factors and circumstances, including the maturity of the store, changes in the economic environment, unfavorable changes in legal factors or business climate and future operating plans. The more significant inputs used in determining our estimate of the projected undiscounted cash flows include projected sales and projected margins as well as the estimate of the remaining useful life of the assets. If the carrying amount is not recoverable, we record an impairment charge, if any, for the excess of the carrying amount over the fair value, which is estimated based on discounted projected future operating cash flows of the store over the remaining service life using a risk adjusted discount rate that is commensurate with the inherent risk.

Recent accounting pronouncements

Refer to Note 1 to the consolidated financial statements for discussion of new accounting pronouncements.

ITEM 7.    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 our audited consolidated financial statements and related notes included herein. This discussion may contain forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements and Risk Factors for a discussion of the uncertainties and risks associated with these statements. 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 Consolidated Financial Statements. All dollar amounts are presented in millions, unless otherwise noted, except per share amounts.

Discussion regarding our financial condition and results of operations for fiscal 2022 compared with fiscal 2021 is included in Item 7 of our fiscal 2022 Annual Report on Form 10-K filed March 28, 2023.

Financial Highlights

•Revenue of $2,205.3 million increased 12.3% compared with $1,964.4 million in fiscal 2022.

•Net income totaled $126.9 million, or $2.88 per diluted share, compared with net income of $137.1 million, or $2.79 per diluted share in fiscal 2022.

•Adjusted EBITDA increased $75.2 million to $555.6 million, or 25.2% of revenues, compared with Adjusted EBITDA of $480.4, or 24.5% of revenues, in fiscal 2022. See further discussion of Adjusted EBITDA, a non-GAAP measure, at Non-GAAP Financial Measures below as well as a reconciliation to net income at Reconciliations of Non-GAAP Financial Measures below.

•The 53rd week of fiscal 2023 contributed $39.5 million in revenue.

General

We are a leading owner and operator of high-volume venues in North America that combine entertainment and dining for both adults and families under the “Dave & Buster’s” and “Main Event” brands. The core of our concept is to offer our customers various forms of entertainment along with quality dining 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 teenagers. 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.

Strategy

Our strategy is built on the following key initiatives:

•Offer the latest entertainment at competitive prices

•Offer novel food & drink to bring people together

•Drive customer engagement through strategic marketing and loyalty offerings

•Optimize our footprint through opening new stores and remodeling existing locations

•Drive incremental sales volume through advertising and hosting special events

•Drive an improved guest experience and optimize operations through targeted technology investments

For further information about our strategy, refer to “Item 1. Strategy”.

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 owned and open for a full

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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 fiscal 2023.

New store openings. Our ability to reach new customers is influenced by the opening of additional stores in 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. During fiscal 2023, we opened eleven new Dave & Buster's stores and five Main Event stores. We currently plan to open 15 stores in fiscal 2024.

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, (gain) loss on property and equipment transactions, 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.

Adjusted EBITDA and Adjusted EBITDA Margin are presented because we believe they provide 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.

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We believe 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 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

The Company’s fiscal year consists of 52 or 53 weeks ending on the Sunday after the Saturday closest to January 31. Fiscal year 2023, which ended on February 4, 2024, contained 53 weeks. Fiscal years 2022 and 2021, which ended on January 29, 2023 and January 30, 2022, respectively, each contained 52 weeks. Each quarterly period has 13 weeks, except in a 53-week year when the fourth quarter has 14 weeks. All dollar amounts are presented in millions, unless otherwise noted, except share and 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 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 have historically fluctuated due to seasonal factors. Typically, we have higher revenues associated with the spring and year-end holidays, and sales and customer traffic during these periods are susceptible to the impact of severe, unfavorable or unseasonably mild weather. Our third quarter, which encompasses the back-to-school fall season, has historically had lower revenues as compared to other quarters.

We expect 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.

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Fiscal 2023 Compared to Fiscal 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 Consolidated Statements of Comprehensive Income.

(1)All revenues and costs are expressed as a percentage of total revenues for the respective period presented, except cost of entertainment, which is expressed as a percentage of entertainment revenues, and cost of food and beverage, which is expressed as a percentage of food and beverage revenues.

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Reconciliations of Non-GAAP Financial Measures

Adjusted EBITDA

The following table reconciles Net income to EBITDA and Adjusted EBITDA (in millions of dollars and as a percent of total revenues) for the periods indicated:

(1)Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated comprehensive income statement.

(2)Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated comprehensive income statement.

(3)System implementation costs represent expenses incurred related to the development and launch of new enterprise resource planning, human capital management and inventory software for our stores and store support teams and staff augmentation for the implementation team at the store support center. These charges are primarily recorded in general and administrative expenses on the consolidated comprehensive income statement.

(4)Includes one-time, third-party consulting fees that are not part of our ongoing operations, impairment expenses and (gain) loss on property and equipment transactions.

Store Operating Income Before Depreciation and Amortization

The following table reconciles Operating income to Store Operating Income Before Depreciation and Amortization (in millions of dollars and as a percent of total revenues) for the periods indicated:

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Capital Additions

The following table reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives (“Payments from landlords”).

Results of Operations

Revenues - Selected revenue data (in millions except for store operating weeks) and store data for the periods indicated are as follows:

(1)Total store operating weeks, comparable store operating weeks and noncomparable store operating weeks included an additional 220, 141 and 79 operating weeks, respectively, due to the 53rd week included in fiscal 2023.

(2)Noncomparable store revenues and operating weeks includes all of the acquired Main Event stores as they were owned less than 18 months at the beginning of fiscal 2023. See further discussion of the definition of comparable and noncomparable stores at Key Measures of Our Performance above.

The table below represents our revenue mix for the fiscal periods indicated.

Total revenues increased $240.9 million, or 12.3%, to $2,205.3 million in fiscal 2023 compared to $1,964.4 million in fiscal 2022. The increase in revenue is primarily attributable to increased revenue from our Main Event stores, which were acquired on June 29, 2022, incremental revenue from new, noncomparable, Dave & Buster's stores, and incremental revenues as a result of the 53rd week in fiscal 2023, partially offset by a 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 fiscal 2023 decreased by $67.8 million, or 6.5%, to $973.8 million from $1,041.6 million in fiscal 2022. Food sales at comparable stores decreased by $11.9 million, or 3.1%, to $366.8 million in fiscal 2023 from $378.7 million in fiscal 2022. Beverage sales at comparable stores increased by $5.0 million, or 2.8%, to $184.2 million in fiscal 2023 from $179.2 million in fiscal 2022.

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Cost of products - The total cost of products was $337.0 million for fiscal 2023 and $308.9 million for fiscal 2022. The total cost of products as a percentage of total revenues decreased to 15.3% for fiscal 2023 compared to 15.7% for fiscal 2022.

Cost of entertainment increased to $134.1 million in fiscal 2023 compared to $115.1 million in fiscal 2022. The cost of entertainment, as a percentage of entertainment revenues, increased to 9.3% for fiscal 2023 from 8.9% in the fiscal 2022. The increase was primarily due to a shift in mix toward more redemption games.

Cost of food and beverage products increased to $202.9 million for fiscal 2023 compared to $193.8 million for fiscal 2022. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased to 26.3% for fiscal 2023 from 28.6% for fiscal 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 $526.0 million in fiscal 2023 compared to $470.7 million in fiscal 2022. The total cost of operating payroll and benefits as a percentage of total revenues was 23.9% in fiscal 2023 compared to 24.0% in fiscal 2022.

Other store operating expenses - Other store operating expenses increased to $686.2 million in fiscal 2023 compared to $600.6 million in fiscal 2022. The increase is primarily due to the additional store operating hours related to our Main Event stores, the impact of the 53rd week in fiscal 2023, the impact of newly opened stores, and higher occupancy and marketing costs. Other store operating expense as a percentage of total revenues increased to 31.1% in fiscal 2023 compared to 30.6% in fiscal 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 $122.6 million in fiscal 2023 compared to $137.8 million in fiscal 2022. The decrease in general and administrative expenses was driven primarily by lower transaction and integration costs, lower incentive compensation in the current year, and lower stock based compensation expense, partially offset by system implementation and consulting costs. General and administrative expenses as a percentage of total revenues decreased to 5.6% in fiscal 2023 compared to 7.0% in fiscal 2022 due primarily to the reasons noted above.

Depreciation and amortization expense - Depreciation and amortization expense increased to $208.5 million in fiscal 2023 compared to $169.3 million in fiscal 2022, primarily due to the acquired Main Event stores and the impact of the 53rd week in fiscal 2023.

Pre-opening costs - Pre-opening costs increased to $18.4 million in fiscal 2023 compared to $14.6 million in fiscal 2022 primarily related to sixteen new store openings in fiscal 2023 compared to eight new store openings in fiscal 2022.

Interest expense, net - Interest expense, net increased to $127.4 million in fiscal 2023 compared to $87.4 million in fiscal 2022 due primarily to an increase in average outstanding debt and interest expense recorded as a result of a sale-leaseback transaction, partially offset by lower interest rates on the outstanding credit facility balances and an increase in interest income. See further discussion of the Company's debt activity at Note 7 to the consolidated financial statements. See further discussion of the sale-leaseback transaction at Note 9 to the consolidated financial statements.

Loss on debt refinancing - Loss on debt refinancing was $16.1 million in fiscal 2023 and $1.5 million in fiscal 2022. The amount for fiscal 2023 is related to the debt refinancings in January 2024 and June 2023. The amount for fiscal 2022 is related to the debt refinancing in June 2022. See further discussion of the Company's debt refinancing activity at Note 7 to the consolidated financial statements.

Provision for income taxes - The effective tax rate for fiscal 2023 was 22.2%, compared to 21.0% for fiscal 2022. The previous year tax provision includes higher excess tax benefits associated with share-based compensation.

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Liquidity and Capital Resources

Debt

Senior Secured Credit Agreement

In connection with the closing of the Main Event Acquisition on June 29, 2022, the Company 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 Main Event Acquisition. The revolving credit facility can expire before the stated maturity date if the aggregate outstanding principal amount of the Notes, as defined below, exceeds $100.0 million ninety-one 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. The Credit Facility is unconditionally guaranteed by Dave & Buster’s Holdings, Inc. (“D&B Holdings”), and certain of Dave & Buster’s, Inc.’s (“D&B Inc.”) existing and future wholly owned material domestic subsidiaries serve as guarantors and/or co-borrowers.

As of February 4, 2024, we had letters of credit outstanding of $9.7 million and an unused commitment balance of $490.3 million 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 in the Credit Facility, plus additional amounts subject to compliance with applicable leverage ratio and/or interest coverage ratio requirements.

The original interest rates per annum applicable to SOFR term loans were based on a defined SOFR rate (with a floor of 0.50%) plus an additional credit spread adjustment of 0.10%, plus a margin of 5.00%. The original interest rates per annum applicable to SOFR revolving loans (the “Revolving Loans”) were based on a defined SOFR rate (with a floor of 0.50%) plus an additional credit spread adjustment of 0.10%, plus an initial margin of 4.75%. Unused commitments under the revolving facility incur initial commitment fees of 0.50%. After the Company’s third quarter of fiscal 2022, the margin for the Revolving Loans became subject to a pricing grid based on net total leverage, ranging from 4.25% to 4.75%, and commitment fees became subject to a pricing grid based on net total leverage, ranging from 0.30% to 0.50%.

First Amendment to the Credit Facility (the "First Amendment")

On June 30, 2023, D&B Inc entered into the First Amendment with its banking syndicate, which amended the Credit Facility. The First Amendment provided for a new tranche of term loans in an aggregate principal amount of $900.0 million (the “2023 Term B Loans”) which consisted of $843.6 million of 2023 refinancing Term B Loans which refinanced in full the term loans outstanding immediately prior to the First Amendment effective date and $56.4 million of 2023 additional Term B Loans, which were used for general corporate and working capital purposes. The 2023 Term B Loans, which 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 Facility 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 could be prepaid at any time, without premium or penalty, but were 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 was made at any time during the first six months after the First Amendment effective date.

Under the First Amendment, the 2023 Term B Loans bore interest at Term SOFR (plus an additional credit spread adjustment of 0.10%) or ABR (each, as defined in the amended Credit Facility) 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 bore interest subject to a pricing grid based on 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%.

Second Amendment to the Credit Facility (the "Second Amendment")

On January 19, 2024, D&B Inc entered into the Second Facility with its banking syndicate, which amended the Credit Facility. The Second Amendment provides for a new tranche of term loans in an aggregate principal amount of $897.8 million (the “2024 Term B Loans”) which consist of $897.8 million of 2024 refinancing Term B Loans which refinanced in full the 2023 Term B Loans outstanding immediately prior to the Second Amendment effective date. The 2024 Term B Loans reduced the interest rate margin applicable to term loans and Revolving Loans outstanding under the Credit Facility by 0.50%, removed the previously existing 0.10% credit spread adjustment, provided for an additional 0.25% step-down if a rating of B1/B+ or higher from Moody’s and S&P is achieved (which will step back up if such rating

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is subsequently not maintained), and otherwise have terms substantially the same as the terms of the existing 2023 Term B Loans under the First Amendment. The 2024 Term B Loans could be prepaid at any time, without premium or penalty, but were 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 2024 Term B Loans is made at any time during the first six months after the Second Amendment effective date.

The 2024 Term B Loans bear interest at Term SOFR or ABR (each, as defined in the amended Credit Facility) plus (i) in the case of Term SOFR loans, 3.25% per annum and (ii) in the case of ABR loans, 2.25% per annum. The Revolving Loans bear interest subject to a pricing grid based on net total leverage, at Term SOFR plus a spread ranging from 2.50% to 3.00% per annum or ABR plus a spread ranging from 1.50% to 2.00% per annum. Unused commitments under the revolving facility incur initial commitment fees of 0.30% to 0.50%.

7.625% Senior Secured Notes

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 2021, the Company redeemed a total of $110.0 million 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.

Interest expense

The following table sets forth our recorded interest expense, net for the periods presented:

(1)    See discussion of sale-leaseback transaction at Note 9 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. Other adjustments include (i) entertainment revenue deferrals, (ii) the cost of new projects, including store pre-opening costs, (iii) business optimization expenses and other restructuring costs, and (iv) 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. The following table sets forth a reconciliation of Net income to Credit Adjusted EBITDA for the periods shown:

(1)Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated comprehensive income statement.

(2)Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated comprehensive income statement.

(3)System implementation costs represent expenses incurred related to the development and launch 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 comprehensive income statement.

(4)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.

(5)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.

(6)Includes one-time, third-party consulting fees that are not part of our ongoing operations, impairment expenses, and (gain) loss on property and equipment transactions.

The following table provides a calculation of Net Total Leverage Ratio, as defined in our Credit Facility, for the period shown:

(1) Amount represents the face amount of debt outstanding, net of unamortized debt issuance costs and debt discount.

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Dividends and Share Repurchases

There were no dividends declared in fiscal 2023 or fiscal 2022.

On March 27, 2023, our Board approved a share repurchase program with an authorization limit of $100.0 million. On April 19, 2023, our Board approved an increase to the authorization limit of $200.0 million for a total of $300.0 million authorized under the program. On September 4, 2023 our Board approved an increase to the authorization limit of $100.0 million for a total of $400.0 million authorized under the program. During fiscal 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 million as of February 4, 2024.

Future decisions to pay cash dividends or repurchase shares continue to be at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Board considers relevant.

Cash Flow Summary

The Company ended the year with $527.6 million of liquidity, which included $37.3 million in cash and cash equivalents and $490.3 million available under its $500.0 million revolving credit facility.

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.

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 $364.2 million in fiscal 2023 compared to $444.4 million in fiscal 2022 primarily due to cash income tax refunds received in fiscal 2022 and changes in working capital due to timing of accruals and payments of expenses.

Investing Activities — Cash flow from investing activities primarily reflects capital expenditures. The Company spent $330.2 million in fiscal 2023 compared to $234.2 million in fiscal 2022 for new store construction and operating improvement initiatives, game refreshment and maintenance capital. In addition to these capital expenditures, the Company completed the Main Event Acquisition in fiscal 2022 for $818.7 million. See further discussion of the Main Event Acquisition at Note 2 to the Consolidated Financial Statements.

Financing Activities — Cash flow used in financing activities in fiscal 2023 was $179.4 million primarily attributable to share repurchases of $300.0 million and debt issuance and discount costs incurred, partially offset by proceeds from debt refinancing and borrowings, net of debt repayments, and proceeds from a sale-leaseback transaction. Cash flow from financing activities in fiscal 2022 was $762.9 million primarily attributable to proceeds from debt refinancing and borrowings, net of debt repayments, partially offset by share repurchases, and debt issuance costs incurred.

Contractual and Other Commitments

The Company had the following obligations as of February 4, 2024:

•Long-term debt obligations, including scheduled interest payments (Refer to Note 7 of the Notes to the Consolidated Financial Statements)

•Future minimum lease obligations under non-cancelable leases (Refer to Note 9 of the Notes to the Consolidated Financial Statements)

•Software as a service subscription commitments of approximately $8.0 million to be paid in annual installments of approximately $2.0 million through fiscal 2028.

•Approximately $9.0 million of minimum food purchase commitments through the end of fiscal 2024.

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Critical accounting policies and estimates

The above discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. 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.

Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements. Critical accounting policies are those that we believe are most important to portraying our financial condition and results of operations and require the greatest amount of judgment by management. Judgment or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgment that is involved in preparing the consolidated financial statements.

Accounting for entertainment operations. Entertainment revenues are primarily recognized upon utilization of game play credits on gaming cards purchased and 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 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. We estimate the amount of deferred revenue based upon credits and tickets remaining on gaming cards, historic game play credit and ticket utilization patterns and estimates of the standalone selling prices of game play credits and the customer material right. The standalone selling price of the customer material right is estimated using an equivalent chip cost plus margin approach. For purposes of recognizing revenue, the total amount collected from each customer is then allocated between the two performance obligations based on the relative standalone selling price of each obligation.

Accounting for acquisitions. The Company accounts for acquisitions under the acquisition method of accounting, which requires that 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.

Accounting for impairment of goodwill and tradenames. We assess the recoverability of goodwill and indefinite-lived tradename assets related to our reporting units on an annual basis or more often if circumstances or events indicate impairment may exist. We may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. In considering the qualitative approach, we evaluate factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units.

If the qualitative assessment is not performed or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the fair value of the reporting unit is calculated. We determine fair value based on a combination of market-based values and discounted projected future operating cash flows of the reporting units using a risk adjusted discount rate that is commensurate with the risk inherent in our current business model. We make assumptions regarding future revenues and cash flows, expected growth rates, terminal values and other factors which could significantly impact the fair value calculations. The carrying value of the reporting unit is compared to its estimated fair value, with any excess of carrying value over fair value deemed to be an indicator of impairment. In the event that these assumptions change in the future, we may be required to record impairment charges related to goodwill.

We consider our Dave & Buster's and Main Event brands to be both our operating segments and reporting units. The carrying value of goodwill as of February 4, 2024 was $742.5 million, of which $272.6 million related to the Dave & Buster's operating segment and $469.9 million related to the goodwill added as a result of the Main Event Acquisition. Additionally, the carrying value of tradenames as of February 4, 2024 was $178.2 million, of which $79.0 million related to the Dave & Buster's operating segment and $99.2 million related to the tradename acquired as a result of the Main Event Acquisition. We performed our annual impairment test in the fourth quarter of fiscal 2023 by utilizing the qualitative approach and determined that there were no events or circumstances to indicate that it was more likely than not that the fair value of our reporting units, or the Dave & Buster's and Main Event tradenames, was less than their carrying values.

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Accounting for impairment of long-lived assets. We assess the potential impairment of our long-lived assets related to each store, including property and equipment and right-of-use assets, on an annual basis or whenever events or changes in circumstances indicate that the carrying values of these assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual store level, since this is the lowest level of identifiable cash flows and primarily includes an assessment of historical cash flows and other relevant factors and circumstances, including the maturity of the store, changes in the economic environment, unfavorable changes in legal factors or business climate and future operating plans. The more significant inputs used in determining our estimate of the projected undiscounted cash flows include future revenue growth and projected margins as well as the estimate of the remaining useful life of the assets. If the carrying amount is not recoverable, we record an impairment charge, if any, for the excess of the carrying amount over the fair value, which is estimated based on discounted projected future operating cash flows of the store over the remaining service life using a risk adjusted discount rate that is commensurate with the inherent risk.

Recent accounting pronouncements

Refer to Note 1 to the Consolidated Financial Statements for discussion of new accounting pronouncements.

ITEM 7.    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 our audited consolidated financial statements and related notes included herein. This discussion may contain forward-looking statements. See Cautionary Statement Regarding Forward-Looking Statements and Risk Factors for a discussion of the uncertainties and risks associated with these statements. 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 Consolidated Financial Statements. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.

The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes included in this report. Discussion regarding our financial condition and results of operations for fiscal 2021 compared with fiscal 2020 is included in Item 7 of our fiscal 2021 Annual Report on Form 10-K filed March 29, 2022. In the Financial Highlights section below, we discuss certain fiscal 2022 results in comparison to fiscal 2019 as that was the last full fiscal year of results that were not impacted by the COVID-19 pandemic.

Recent Events

On June 29, 2022, the Company completed its acquisition (the “Main Event Acquisition” or “the Acquisition”) including 49 family entertainment centers under the Main Event brand and 3 family entertainment centers under the name The Summit (collectively referred to as “Main Event”), operating in 17 states. Refer to Note 2, Business Combinations, to the Consolidated Financial Statements for further details.

Financial Highlights

•Revenue of $1,964,427 increased 50.6% compared with $1,304,056 in fiscal 2021 and increased 45.0% compared with fiscal 2019. Main Event branded stores contributed $288,778 of revenue during fiscal 2022.

•Comparable sales at Dave & Buster’s branded stores increased 24.8% compared with fiscal 2021 and 11.6% compared with fiscal 2019.

•Net income totaled $137,135, or $2.79 per diluted share, compared with net income of $108,640, or $2.21 per diluted share in fiscal 2021. Net income for fiscal 2022 was impacted by $25,257 of incremental acquisition and integration costs related to the Main Event Acquisition.

•Adjusted EBITDA totaled $480,367, or 24.5% of revenues, compared with Adjusted EBITDA of $343,575, or 26.3% of revenues, in fiscal 2021 and $289,251, or 22.8% of revenues, in fiscal 2019. See further discussion of Adjusted EBITDA, a non-GAAP measure, at Non-GAAP Financial Measures below as well as a reconciliation to net income at Reconciliations of Non-GAAP Financial Measures below.

•The Company ended the year with $672,686 million of liquidity, which included $181,591 in cash and $491,095 available under its $500 million revolving credit facility.

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 amusement all in one location. Our amusement offerings provide an extensive assortment of entertainment 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 teenagers. 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.

Strategy

Our strategy is built on four key components, including offering the latest entertainment to enjoy together, novel food & drink to bring people together, creating an aligned team and integrated experience, and driving customer engagement. For further information about our strategy, refer to “Item 1. Strategy”.

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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. Due to the limitations of store operations during the COVID-19 pandemic, the comparable store base for fiscal 2021 and fiscal 2022 is defined as stores open for a full 18 months before the beginning of fiscal 2020 and excludes two stores that the Company elected not to reopen after they were closed in March 2020 due to local operating limitations and one store in Cary, North Carolina that was closed and relocated during the fourth quarter of fiscal 2021. Our comparable store base consisted of 113 stores as of the end of fiscal 2022 and 2021.

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. During fiscal 2022, we opened seven new Dave & Buster's stores, added 52 stores as a result of the Main Event Acquisition on June 29, 2022, and opened one Main Event store since they were acquired. We currently plan to open sixteen stores in fiscal 2023.

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 vary from period to period and 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 extinguishment/refinance, provision (benefit) for 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.

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 (defined at Liquidity and Capital Resources below). Other adjustments include (i) amusement deferrals, (ii) the cost of new projects, including store pre-opening costs, (iii) business optimization expenses and other restructuring costs, and (iv) other costs and adjustments as permitted by the Debt Agreements. We believe the presentation of Credit Adjusted

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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 extinguishment/refinance 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

The Company’s fiscal year consists of 52 or 53 weeks ending 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. Fiscal 2022, 2021 and 2020, which ended on January 29, 2023, January 30, 2022, and January 31, 2021, respectively, each contained 52 weeks. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.

Store-Level Variability, Quarterly Fluctuations, Seasonality and Inflation

We have historically operated 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. Furthermore, rents in our new stores are typically higher than our comparable store base.

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 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. During fiscal 2020 and fiscal 2021, results also fluctuated due to the timing and frequency of temporary closures and operating restrictions due to state and local guidelines imposed due to the COVID-19 pandemic.

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.

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Fiscal 2022 Compared to Fiscal 2021

Results of operations. The following table sets forth selected data, in thousands of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying Consolidated Statements of Comprehensive Income (Loss).

(1)We opened eight new stores and acquired 52 stores as a result of the Main Event Acquisition (see Note 2, Business Combinations, to the Consolidated Financial Statements) during fiscal 2022. Our total and comparable store counts as of the end of fiscal 2021 exclude a store in Cary, North Carolina, which was closed on January 2, 2022, and relocated prior to the end of our fiscal year. We opened five new stores during fiscal 2021, including our relocated Cary, North Carolina store.

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Reconciliations of Non-GAAP Financial Measures

Adjusted EBITDA

The following table reconciles Net income to Adjusted EBITDA for the periods indicated:

(1)Fiscal 2021 includes a $3,230 severance obligation to the Company’s former Chief Executive Officer, who terminated his service in this position effective September 30, 2021.

(2)We have historically added back store pre-opening costs to calculated Adjusted EBITDA. To more closely align our reported Adjusted EBITDA with recurring operating cash flows, we excluded pre-opening costs from Adjusted EBITDA beginning fiscal 2022. Adjusted EBITDA for fiscal 2021 has been adjusted to reflect a comparable presentation.

Store Operating Income Before Depreciation and Amortization

The following table reconciles Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:

Capital Additions

The following table reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based tenant improvement allowances or proceeds from sale-leaseback transactions (collectively, “Payments from landlords”).

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Results of Operations

Revenues - Selected revenue and store data for the periods indicated are as follows:

(1)     Noncomparable store revenues and operating weeks includes all of the acquired Main Event stores as they were owned less than 18 months during fiscal 2022. See further discussion of the definition of comparable and noncomparable stores at Key Measures of Our Performance above.

Total revenues increased $660,371, or 50.6%, to $1,964,427 in fiscal 2022 compared to $1,304,056 in fiscal 2021. The increase in revenue is primarily attributable to $288,778 in revenue from our Main Event stores, and a 24.8% increase in comparable store sales. Comparable store revenue increased due primarily to increased special event incidence, increases in food and beverage prices in the third quarter of fiscal 2021 and in fiscal 2022, and a 3.7% increase in comparable store operating weeks. Noncomparable store revenue increased $394,515 in fiscal 2022 compared to fiscal 2021 primarily due to the acquisition 52 stores as a result of the Main Event Acquisition and new store openings during the year.

The table below represents our revenue mix for the fiscal periods indicated.

The shift in mix from amusement sales to food and beverage sales is due, in part, to increased special events, and food price increases effective midway through the third quarter of fiscal 2021. Food sales at comparable stores increased by $76,377, or 31.7%, to $317,503 in fiscal 2022 from $241,127 in fiscal 2021. Beverage sales at comparable stores increased by $35,663, or 30.5%, to $152,670 in fiscal 2022 from $117,006 in fiscal 2021. Comparable store amusement and other revenues in fiscal 2022 increased by $152,762, or 21.6%, to $860,714 in fiscal 2022 from $707,952 in fiscal 2021.

Cost of products - The total cost of products was $308,864 for fiscal 2022 and $204,971 for fiscal 2021. The total cost of products as a percentage of total revenues was consistent at 15.7% for fiscal 2022 and fiscal 2021.

Cost of food and beverage products increased to $193,742 compared to $119,123 for fiscal 2021. Cost of food and beverage products, as a percentage of food and beverage revenues, increased 130 basis points to 28.6% for fiscal 2022 from 27.3% for fiscal 2021. The increase was due to unfavorable impacts of commodity cost increases, primarily in meat and dairy products, during fiscal 2022, and were partially offset by food price increases.

Cost of amusement and other increased to $115,122 in fiscal 2022 compared to $85,848 in fiscal 2021. The costs of amusement and other, as a percentage of amusement and other revenues, decreased 90 basis points to 9.0% for fiscal 2022 from 9.9% for fiscal 2021. This decrease was driven primarily by a change in prices at the game level implemented late in fiscal 2021 and in fiscal 2022.

Operating payroll and benefits - Total operating payroll and benefits increased to $470,729 in fiscal 2022 compared to $287,263 in fiscal 2021. The total cost of operating payroll and benefits as a percentage of total revenues was 24.0% in fiscal 2022 compared to 22.0% in fiscal 2021. This increase is primarily due to hourly wage rate increases and an increase

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in labor hours worked and management salaries as open positions were filled, partially offset by lower incentive compensation costs as fiscal 2021 included referral and retention incentives.

Other store operating expenses - Other store operating expenses increased to $600,568 in fiscal 2022 compared to $402,661 in fiscal 2021. The increase is primarily due to higher utilities, supplies, maintenance, marketing, and other services as well as $88,532 of costs related to Main Event. Other store operating expense as a percentage of total revenues decreased to 30.6% in fiscal 2022 compared to 30.9% in fiscal 2021. This decrease was due primarily to favorable sales leverage.

General and administrative expenses - General and administrative expenses increased to $137,837 in fiscal 2022 compared to $75,501 in fiscal 2021. The increase in general and administrative expenses was driven by $25,257 of transaction and integration costs related to the Main Event Acquisition, $1,841 impairment of the existing Main Event corporate office right-of-use operating lease asset, higher payroll and incentive compensation, and higher stock-based compensation expense. General and administrative expenses, as a percentage of total revenues increased to 7.0% in fiscal 2022 compared to 5.8% in fiscal 2021 due to the reasons noted above.

Depreciation and amortization expense - Depreciation and amortization expense increased to $169,302 in fiscal 2022 compared to $138,329 in fiscal 2021. The increase was due to incremental depreciation related to the Main Event acquisition of $33,798, partially offset by a net decrease in depreciation expense at Dave & Buster’s branded stores. The impact of assets reaching the end of their depreciable lives exceeded expense increases due to recent capital expenditures for new stores, operating initiatives, games, and maintenance capital.

Pre-opening costs - Pre-opening costs increased to $14,620 compared to $8,150 in fiscal 2021 primarily due to opening eight new stores in fiscal 2022 compared to five in fiscal 2021.

Interest expense, net and Loss on debt extinguishment / refinance - Interest expense, net increased to $87,364 in fiscal 2022 compared to $53,910 in fiscal 2021 primarily due to incremental acquisition-related debt of $850,000. Additionally, in connection with the June 29, 2022 debt refinancing, the Company recorded a loss of $1,479 in fiscal 2022, which is explained in Note 7 to the Consolidated Financial Statements. The Company recorded a loss on extinguishment of $5,617 during fiscal 2021 in connection with the early extinguishment of a portion of the Notes then outstanding.

Provision for income taxes - The effective tax rate for fiscal 2022 was 21.0%, compared to 14.9% in fiscal 2021. The previous year tax provision includes higher excess tax benefits associated with share-based compensation and credits associated with the reversal of certain tax valuation allowances.

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Liquidity and Capital Resources

Debt

In connection with the closing of the Main Event Acquisition on June 29, 2022, the Company entered into a senior secured credit agreement, which refinanced the $500,000 existing revolving facility, extended the maturity date to June 29, 2027, and added a new term loan facility in the aggregate principal amount of $850,000, with a maturity date of June 29, 2029 (“Credit Facility”). The proceeds of the term loan, net of an original issue discount of $42,500, 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 Notes exceeds $100,000 ninety-one days prior to November 1, 2025. A portion of the revolving facility not to exceed $35,000 is available for the issuance of letters of credit. At the end of fiscal 2022, we had letters of credit outstanding of $8,905 and an unused commitment balance of $491,095 under the revolving facility. The Credit Facility may be increased through incremental facilities, by an amount equal to the greater of (i) $400,000 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. Because there were no borrowings outstanding under the revolving facility, the Company was not subject to the leverage ratio and/or interest coverage ratio requirements as of January 29, 2023. The Credit Facility is unconditionally guaranteed by Dave & Buster's Holdings, Inc. ("D&B Holdings") and certain of Dave & Buster's, Inc.'s ("D&B Inc’s") existing and future wholly owned material domestic subsidiaries.

The interest rates per annum applicable to Secured Overnight Financing Rate ("SOFR") term loans are based on a defined SOFR rate (with a floor of 0.50%) plus an additional credit spread adjustment of 0.10%, plus a margin of 5.00%. The interest rates per annum applicable to SOFR revolving loans are based on the term loan SOFR rate, plus an additional credit spread adjustment of 0.10%, plus an initial margin of 4.75%. Unused commitments under the revolving facility incur initial commitment fees of 0.50%. After the Company’s third quarter of fiscal 2022, the margin for SOFR revolving loans are subject to a pricing grid based on net total leverage, ranging from 4.25% to 4.75%, and commitment fees are subject to a pricing grid based on net total leverage, ranging from 0.30% to 0.50%.

During fiscal 2020, the Company issued $550,000 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 2021, the Company redeemed a total of $110,000 outstanding principal amount of the Notes, and paid prepayment premiums of $3,300, plus accrued and unpaid interest to the date of redemptions. The early redemptions of the Notes resulted in a loss on extinguishment of approximately $2,300 related to a proportional amount of unamortized issuance costs. 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.

For fiscal 2022 and fiscal 2021, the Company’s weighted average interest rate on outstanding borrowings was 9.6% and 10.3%, respectively.

Amortization of debt issuance costs and original issue discount was $8,466, $4,244 and $2,184 for fiscal 2022, fiscal 2021 and fiscal 2020, respectively, and is included in “Interest expense, net” in the Consolidated Statements of Comprehensive Income (Loss). During the second quarter of fiscal 2022, the Company recognized a loss of $1,479, related to the write off of unamortized debt issuance costs associated with exiting creditors of the refinanced revolving facility.

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 of 3.5:1, as defined, as of the end of each fiscal quarter, beginning with the first full fiscal quarter after the Closing Date. We believe we were in compliance with the covenants and terms of our debt agreements as of January 29, 2023.

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Credit Adjusted EBITDA and Net Total Leverage Ratio

The following table reconciles Net income to Credit Adjusted EBITDA, as defined in our Credit Facility, and calculates Net Total Leverage Ratio, as defined in our Credit Facility, as of and for the period indicated:

(1)     Total adjustment amount for Main Event for periods prior to the Company's ownership during the trailing four quarter Test Period, as defined on a Pro Forma Basis in our Credit Facility.

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Dividends and Share Repurchases

On December 6, 2021, our Board of Directors approved a share repurchase program with an authorization limit of $100,000, which expired during fiscal 2022. During fiscal 2022, we repurchased 764,988 shares under this program at an average cost per share of $32.70 for a total cost of $25,015. There were no repurchases of our common stock during fiscal 2021.

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 and other factors that the Board of Directors considers relevant. There were no dividends declared in either fiscal 2022 or fiscal 2021.

Cash Flow Summary

The Company ended the year with $672,686 million of liquidity, which included $181,591 in cash and $491,095 available under its $500 million revolving credit facility.

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 increased to $444,468 in fiscal 2022 compared to $283,128 in fiscal 2021 driven primarily by the 52 stores added as a result of the Main Event Acquisition, the opening of eight new stores, the additional 210 operating weeks for our comparable stores in fiscal 2022 and the receipt of a federal tax refund in the amount of approximately $44,200. These increases in cash flow from operating activities were offset by the payment of acquisition and integration costs of $25,257.

Investing Activities — Cash flow from investing activities historically reflects primarily capital expenditures. In fiscal 2022, the Company spent $234,224 for new store construction and operating improvement initiatives, game refreshment and maintenance capital. In fiscal 2021, the Company spent $92,197 for new store construction and operating improvement initiatives, game refreshment and maintenance capital. In addition to these capital expenditures, the Company completed the Main Event Acquisition in June 2022 for $818,666. See further discussion at Note 2 to the Consolidated Financial Statements.

Financing Activities — Cash flow from financing activities in fiscal 2022 primarily reflected net term loan proceeds from debt of $807,500 as a result of entering into a new credit facility agreement in June 2022. The proceeds were used to pay for the Main Event Acquisition, including $17,748 of debt issuance costs associated with the refinancing. Additionally, the Company received $8,719 of proceeds related to the exercise of stock options by employees of the Company, repurchased shares at a cost of $25,015 under a share repurchase program and repurchased $8,525 of shares that were withheld for tax purposes on behalf of employees of the Company.

In fiscal 2021, the Company had net repayments of $60,000 of its revolving credit facility and a repayment related to the early extinguishment of $110,000 principal of the Notes. The Company received $5,124 of proceeds related to the exercise of stock options by employees of the Company. The Company also repurchased $9,465 related to shares withheld for tax purposes on behalf of employees of the Company.

Contractual and Other Commitments

The Company had the following obligations as of January 29, 2023:

•Long-term debt obligations, including scheduled interest payments (Refer to Note 7 of the Notes to the Consolidated Financial Statements)

•Future minimum lease obligations and deferred rent payments under non-cancelable leases (Refer to Note 9 of the Notes to the Consolidated Financial Statements)

•Software as a service subscription commitments of approximately $10,000 to be paid in annual installments of approximately $2,000 through fiscal 2028

•Approximately $9,100 of minimum food purchase commitments through the end of fiscal 2023

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Critical accounting policies and estimates

The above discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. 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. Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements. Critical accounting policies are those that we believe are most important to portraying our financial condition and results of operations and require the greatest amount of judgment by management. Judgment or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgment that is involved in preparing the consolidated financial statements.

Accounting for amusement operations. Amusement revenues are primarily recognized upon utilization of game play credits on gaming cards purchased and 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 amusement revenues for the estimated unfulfilled performance obligations 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. We estimate the amount of deferred revenue based upon credits and tickets remaining on gaming cards, historic game play credit and ticket utilization patterns and estimates of the standalone selling prices of game play credits and the customer material right. The standalone selling price of the customer material right is estimated using an equivalent chip cost plus margin approach. For purposes of recognizing revenue, the total amount collected from each customer is then allocated between the two performance obligations based on the relative standalone selling price of each obligation.

Accounting for acquisitions. The Company accounts for acquisitions under the acquisition method of accounting, which requires that 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.

Accounting for impairment of goodwill. We assess the recoverability of goodwill related to our reporting units on an annual basis or more often if circumstances or events indicate impairment may exist. We may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. In considering the qualitative approach, we evaluate factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units.

If the qualitative assessment is not performed or if we determine that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, the fair value of the reporting unit is calculated. We determine fair value based on a combination of market-based values and discounted projected future operating cash flows of the reporting units using a risk adjusted discount rate that is commensurate with the risk inherent in our current business model. We make assumptions regarding future revenues and cash flows, expected growth rates, terminal values and other factors which could significantly impact the fair value calculations. The carrying value of the reporting unit is compared to its estimated fair value, with any excess of carrying value over fair value deemed to be an indicator of impairment. In the event that these assumptions change in the future, we may be required to record impairment charges related to goodwill.

We consider our Dave & Buster's and Main Event brands to be both our operating segments and reporting units. The carrying value of goodwill as of January 29, 2023 was $744,480, of which $272,642 related to the Dave & Buster's operating segment and $471,838 related to the goodwill added as a result of the Main Event Acquisition. We performed our annual impairment test in the fourth quarter of fiscal 2022 by utilizing the qualitative approach and determined that there were no events or circumstances to indicate that it was more likely than not that the fair value of our reporting units was less than their carrying values.

Accounting for impairment of long-lived assets. We assess the potential impairment of our long-lived assets related to each store, including property and equipment and right-of-use (“ROU”) assets, on an annual basis or whenever events or changes in circumstances indicate that the carrying values of these assets may not be recoverable. In determining the recoverability of the asset value, an analysis is performed at the individual store level, since this is the lowest level of

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identifiable cash flows and primarily includes an assessment of historical cash flows and other relevant factors and circumstances, including the maturity of the store, changes in the economic environment, unfavorable changes in legal factors or business climate and future operating plans. The more significant inputs used in determining our estimate of the projected undiscounted cash flows include future revenue growth and projected margins as well as the estimate of the remaining useful life of the assets. If the carrying amount is not recoverable, we record an impairment charge, if any, for the excess of the carrying amount over the fair value, which is estimated based on discounted projected future operating cash flows of the store over the remaining service life using a risk adjusted discount rate that is commensurate with the inherent risk.

Recent accounting pronouncements

Refer to Note 1 of Notes to the Consolidated Financial Statements for information regarding new accounting pronouncements.

ITEM 7. 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 our audited consolidated financial statements and related notes included herein. 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 Consolidated Financial Statements. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.

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COVID-19
Pandemic

In March 2020, a novel strain of coronavirus
(“COVID-19”)
outbreak was declared a global pandemic and a National Public Health Emergency. Shortly after the national emergency declaration, state and local officials began placing restrictions on businesses, some of which allowed
To-Go
or curbside service only while others limited capacity in the dining room or Midway. By March 20, 2020, all our 137 operating stores were temporarily closed. On April 30, 2020, our first store
re-opened
to the public, and, by the end of fiscal 2020, 107 of our 140 stores were open and operating in limited capacity. The Company
re-opened
the remaining 33 stores that had been temporarily closed by August 1, 2021, the end of the second quarter of fiscal 2021. During the fourth quarter of fiscal 2021, our two Canadian stores temporarily closed due to the resurgence, and shortly after the end of our fiscal year, these two stores
re-opened
with limited operations. By the end of March 2022, the Company expects all types of
COVID-19
related restrictions to be lifted in all but three of our stores.

These developments have had a material adverse impact on the Company’s revenues, results of operations and cash flows for fiscal 2020, and during fiscal 2021, continued to have a significant impact on our business and results of operations. The ongoing effects of
COVID-19
and its variants, including, but not limited to, consumer behavior, capacity restrictions, mask and vaccination mandates, wage inflation, our ability to continue to staff our stores and disruptions in the supply chain, will determine the impact to our operating results and financial position. The impact to our operations has been most notable during the periods of greatest accelerating
COVID-19
case counts. We have incurred and will continue to incur additional costs to address government regulations and the safety of our team members and customers.

Financial Highlights

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 name “Dave & Buster’s”. Founded in 1982, the core of our concept is to offer our customers the opportunity to “Eat Drink Play and Watch” all in one location. Eat and Drink are offered through a full menu of entrées and appetizers and a full selection of
non-alcoholic
and

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alcoholic beverages. Our Play and Watch offerings provide an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised events. Our brand appeals to a relatively balanced mix of male and female adults, as well as families and teenagers. We believe we appeal to a diverse customer base by providing a highly customizable experience in a dynamic and fun setting.

Our stores average 40,000 square feet and range in size between 16,000 and 70,000 square feet. During the
COVID-19
pandemic recovery period, to comply with various federal, state, and local guidelines and in response to changing customer levels, our stores operated with reduced hours of operation. Generally, our stores have returned to pre-pandemic operating hours and are open seven days a week, with normal hours of operation typically from 11:00 a.m. to midnight, with some stores open for extended hours on weekends.

Strategy

Our strategy is built on four key components, including offering the latest entertainment to enjoy together, novel food & drink to bring people together, creating an aligned team and integrated experience, and driving customer engagement. For further information about our strategy, refer to “Item 1. Strategy”.

Key Measures of Our Performance

We monitor and analyze several key performance measures to manage our business and evaluate financial and operating performance. These measures include:

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. Due to the limitations of store operations during the
COVID-19
pandemic, the comparable store base for fiscal 2021 is defined as stores open for a full 18 months before the beginning of fiscal 2020 and excludes two stores that the Company elected not to reopen after they were closed in March 2020 due to local operating limitations and one store in Cary, North Carolina that was closed and relocated during the fourth quarter of fiscal 2021. Our comparable store base consisted of 113, 114, and 99 stores as of the end of fiscal 2021, 2020 and 2019, respectively.

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. During fiscal 2021, we opened five new stores, including our relocated Cary, North Carolina store. We currently plan to open eight stores in fiscal 2022.

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, 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 entitled 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
pre-opening
and 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 vary from period to period and do not directly relate to the ongoing operations of the currently underlying business of our

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stores and therefore complicate comparison of the underlying business between periods. Nevertheless, because of the limitations described above, management does not view Adjusted EBITDA or Store Operating Income Before Depreciation and Amortization 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 extinguishment or refinancing, provision (benefit) for income taxes, depreciation and amortization expense, loss on asset disposal, impairment of long-lived assets, share-based compensation,
pre-opening
costs, currency transaction (gains) losses and other costs. “Adjusted EBITDA Margin” is defined as Adjusted EBITDA divided by total revenues.

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.

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 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

The Company’s fiscal year consists of 52 or 53 weeks ending 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. Fiscal 2021, 2020 and 2019, which ended on January 30, 2022, January 31, 2021, and February 2, 2020, respectively, each contained 52 weeks. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.

Store-Level Variability, Quarterly Fluctuations, Seasonality and Inflation

We have historically operated 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

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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.

While fiscal 2020 and fiscal 2021 were unusual years with the impact of
COVID-19,
historically in the first year of operation, new store operating margins (excluding
pre-opening
expenses) typically 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. Furthermore, rents in our new stores are typically higher than our comparable store base.

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 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. During fiscal 2020 and fiscal 2021, results also fluctuated due to the timing and frequency of temporary closures and operating restrictions due to state and local guidelines imposed due to the
COVID-19
pandemic.

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. Although 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, the effects of any supplier price increase or wage rate increases might be partially offset by selected menu price increases if competitively appropriate. In addition, how quickly and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal business operations may be delayed or constrained by lingering effects of the
COVID-19
pandemic on us or our suppliers, third-party service providers, and/or customers.

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Fiscal 2021 Compared to Fiscal 2020

Results of operations.

The following table sets forth selected data, in thousands of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying consolidated statements of comprehensive income (loss).

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Reconciliations of
Non-GAAP
Financial Measures

Adjusted EBITDA

The following table reconciles Net income (loss) to Adjusted EBITDA for the periods indicated:

Store Operating Income Before Depreciation and Amortization

The following table reconciles Operating income (loss) to Store Operating Income Before Depreciation and Amortization for the periods indicated:

Capital Additions

The following table reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based tenant improvement allowances or proceeds from sale-leaseback transactions (collectively, “Payments from landlords”).

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Results of Operations

Revenues

In response to the
COVID-19
outbreak, which was declared a global pandemic and a National Public Health Emergency in the United States in March 2020, the Company temporarily closed all our stores. On April 30, 2020, our first store
re-opened
to the public, and by the end of fiscal 2020, 107 of our 140 stores were open and operating in limited capacity. Of these 107 open stores, 83 were comparable stores. By the end of our second quarter of fiscal 2021, all the Company’s stores were open and operating, the majority of which having no operating restrictions. However, several of the local jurisdictions in which we operate instituted masking and vaccination restrictions. During the fourth quarter of fiscal 2021, our two Canadian stores temporarily closed due to the resurgence, and shortly after the end of our fiscal year,
re-opened
in limited capacity.

Selected revenue and store data for the periods indicated are as follows:

Total revenues increased $867,544, or 198.7%, to $1,304,056 in fiscal 2021 compared to total revenues of $436,512 in fiscal 2020. The increase in revenue is attributable primarily to more store operating weeks in fiscal 2021 compared to the prior year due to temporary store closures during fiscal 2020, as a result of the
COVID-19
pandemic. The table below represents our revenue mix for the fiscal years indicated. The shift in mix from food and beverage sales to amusement sales of 300 basis points is due, in part, to reduced special events and less discounting of amusements, offset somewhat by food price increases effective midway through the third quarter of fiscal 2021.

Comparable store revenue increased $709,612 or 199.1%, in fiscal 2021 compared to fiscal 2020, due primarily to an 80.8% increase in comparable store operating weeks. Comparable store sales in fiscal 2021 were approximately 88.8% of the levels achieved
pre-pandemic
during fiscal 2019. Our individual comparable stores generally experienced gradual increases in weekly sales performance as operating weeks increased. Individual store performance after
re-opening
was also impacted by changes in local operating restrictions and consumer reactions to changes in local
COVID-19
infection rates.

Food sales at comparable stores increased by $155,171, or 180.5%, to $241,127 in fiscal 2021 from $85,956 in fiscal 2020. Beverage sales at comparable stores increased by $72,108, or 160.6%, to $117,006 in fiscal 2021 from $44,898 in fiscal 2020. Comparable store amusement and other revenues in fiscal 2021 increased by $482,333, or 213.8%, to $707,952 from $225,619 in fiscal 2020.

Non-comparable
store revenue increased $167,103 in fiscal 2021 compared to fiscal 2020, for the same reasons noted above, including 707 more store operating weeks.

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Cost of products

The total cost of products was $204,971 for fiscal 2021 and $74,905 for fiscal 2020. The total cost of products as a percentage of total revenues decreased 150 basis points to 15.7% for fiscal 2021 compared to 17.2% for fiscal 2020.

Cost of food and beverage products increased to $119,123 compared to $45,207 for fiscal 2020. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased 100 basis points to 27.3% for fiscal 2021 from 28.3% for fiscal 2020. The impact of year-over-year cost increases in food products, primarily poultry, were offset by lower closure-related spoilage costs and food price increases effective midway through the third quarter of fiscal 2021.

Cost of amusement and other increased to $85,848 in fiscal 2021 compared to $29,698 in fiscal 2020. The costs of amusement and other, as a percentage of amusement and other revenues, decreased 80 basis points to 9.9% for fiscal 2021 from 10.7% in fiscal 2020. This decrease was driven primarily by lower ticket redemption activity as a percent of tickets issued during the first half of fiscal 2021, partially offset by higher freight costs.

Operating payroll and benefits

Total operating payroll and benefits increased by $169,788, or 144.5%, to $287,263 in fiscal 2021 compared to $117,475 in fiscal 2020. Nearly all our store workforce, except a small team of essential personnel, were furloughed in
mid-March
2020. Hourly team members began to return as stores
re-opened
at reduced staffing levels. The total cost of operating payroll and benefits as a percentage of total revenues was 22.0% in fiscal 2021 compared to 26.9% in 2020. This decrease is primarily due to favorable leveraging on management labor and benefits and lower labor hours due to labor efficiency initiatives and hourly labor staffing shortages, partially offset by increases in the hourly labor costs and higher incentive compensation, including referral and retention incentives implemented during the second quarter of fiscal 2021.

Other store operating expenses

Other store operating expenses increased by $103,197, or 34.5%, to $402,661 in fiscal 2021 compared to $299,464 in fiscal 2020. The increase is primarily due to the impact of increased store weeks during fiscal 2021 on costs such as utilities, supplies, maintenance, and other services and an approximate $11,000 increase in marketing spend. These increases were offset somewhat by a $13,727 charge for impairment of long-lived assets and lease termination costs incurred during fiscal 2020. Other store operating expense as a percentage of total revenues decreased to 30.9% in fiscal 2021 compared to 68.6% in fiscal 2020. This decrease was due primarily to favorable sales leveraging on occupancy costs and utilities and the absence of any impairment charges in fiscal 2021.

General and administrative expenses

General and administrative expenses increased by $28,286, or 59.9%, to $75,501in fiscal 2021 compared to $47,215 in fiscal 2020. The increase in general and administrative expenses was driven primarily by higher incentive compensation, salaries and benefits, professional fees, board fees, hiring cost, travel, and share-based compensation. Fiscal 2021 also includes a $3,230 severance obligation to the Company’s former Chief Executive Officer, who terminated his service in this position effective September 30, 2021, and a $912 impairment charge related to the relocation of our store support center and abandonment of our former corporate office lease. Effective near the end of March 2020, due to the impacts of the
COVID-19
pandemic, most of our corporate team members were furloughed, with reduced pay and benefits for the remaining team members for a twelve-week period, and board fees were temporarily suspended. Share-based compensation was also lower during that same time due to changes in performance stock unit expense.

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Depreciation and amortization expense

Depreciation and amortization expense was relatively flat at $138,329 in fiscal 2021 compared to $138,789 in fiscal 2020. Increased depreciation due to our 2021 and 2020 capital expenditures for new stores, operating initiatives, games, and maintenance capital, was offset by other assets reaching the end of their depreciable lives.

Pre-opening
costs

Pre-opening
costs decreased by $3,126 to $8,150 in fiscal 2021 compared to $11,276 in fiscal 2020 due to delays in construction and a decrease in the number of planned new store openings, as a result of impacts of the
COVID-19
pandemic, which began during the first quarter of fiscal 2020. Specifically, while construction was put on hold or delayed,
pre-opening
rent continued to be recorded for stores under construction.

Interest expense, net and Loss on debt extinguishment / refinancing

Interest expense, net increased by $17,020 to $53,910 in fiscal 2021 compared to $36,890 in fiscal 2020 due primarily to an increase in the weighted average effective interest rate, offset partially by a decrease in average outstanding debt. In connection with the early extinguishment of a portion of the Notes, the Company recorded a loss on extinguishment of $5,617 during fiscal 2021. In connection with the debt refinancing in fiscal 2020, the Company recorded a charge of $904. These events are explained further in Note 5 to the Consolidated Financial Statements.

Provision (benefit) for income taxes

The effective tax rate for fiscal 2021 was 14.9%, compared to a benefit of 28.7% for fiscal 2020. The current year tax provision includes higher excess tax benefits associated with share-based compensation and higher tax credits while the prior year was a tax benefit primarily due to the impact of the
pre-tax
loss and the impact of the tax provisions within the CARES Act.

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Fiscal 2020 Compared to Fiscal 2019

Results of operations.

The following table sets forth selected data, in thousands of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying consolidated statements of comprehensive income (loss).

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Reconciliations of
Non-GAAP
Financial Measures

Adjusted EBITDA

The following table reconciles Net income (loss) to Adjusted EBITDA for the periods indicated: