Dave & Buster's Entertainment, Inc. (PLAY) FY 2025 MD&A

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.