Categories: Wire Stories

Dave & Buster�s Reports Record Fourth Quarter and Fiscal Year End 2022 Financial Results

Company Announces $100 Million Share Repurchase Program and Achievement of its Synergy Target

DALLAS, March 28, 2023 (GLOBE NEWSWIRE) — Dave & Buster�s Entertainment, Inc., (NASDAQ: PLAY), (“Dave & Buster’s” or “the Company”), an owner and operator of entertainment and dining venues, today announced financial results for its fourth quarter and fiscal year ended January 29, 2023.

Key Fourth Quarter 2022 Highlights

  • Revenue of $563.8 million in the quarter increased 64.3% from the fourth quarter of 2021 and increased 62.4% from the fourth quarter of 2019. Including the pro forma contribution of Main Event in the fourth quarter of 2021 and 2019, this quarter’s revenue grew 27.7% and 30.1%, respectively.
  • Pro forma combined comparable store sales (including Main Event branded stores) increased 19.0% compared with the same period in 2021 and 14.1% compared with the same period in 2019.
  • Net income totaled $39.1 million, or 80 cents per diluted share, compared with net income of $25.7 million, or 52 cents per diluted share in the fourth quarter of 2021 and net income of $25.0 million, or 80 cents per diluted share in the fourth quarter of 2019.
  • Adjusted EBITDA (as newly defined to not add back pre-opening expense) of $138.4 million in the quarter increased 62.9% from the fourth quarter of 2021 and increased 85.1% from the fourth quarter of 2019. Including the pro forma contribution of Main Event in the fourth quarter of 2021 and 2019, this quarter’s Adjusted EBITDA grew 30.7% and 48.4%, respectively.
  • The Company opened a new Main Event store in Beaumont, TX.
  • The Company ended the quarter with $672.7 million of liquidity, which included $181.6 million in cash and $491.1 million available under its $500 million revolving credit facility.

Key Fiscal Year 2022 Highlights

  • Revenue of $2.0 billion in fiscal year 2022 increased 50.6% from fiscal year 2021 and increased 45.0% from fiscal year 2019.
  • Net income totaled $137.1 million, or $2.79 per diluted share, in fiscal year 2022 compared with net income of $108.6 million, or $2.21 per diluted share, in fiscal year 2021 and net income of $100.3 million, or $2.94 per diluted share in fiscal 2019.
  • The Company completed its acquisition of Main Event on June 29, 2022. The Company successfully achieved implementation of the activities for its forecasted $25 million annual synergy target previously disclosed and continues to identify opportunities in excess of that target.
  • The Company opened seven new Dave & Buster’s locations and one new Main Event location in fiscal year 2022. Subsequent to the end of the year, the Company has opened an additional Dave & Buster’s location in Puerto Rico and two additional Main Event locations in Little Rock, AR and Tucson, AZ taking the total combined store count to 207.
  • Adjusted EBITDA of $480.4 million in fiscal year 2022 increased 42.8% from fiscal year 2021 and increased 58.3% from fiscal year 2019.

“Driven by robust comparable walk-in sales growth and the tailwind of our special events business continuing its recovery toward pre-pandemic norms, we are pleased to report another strong quarter of financial results to mark our first fiscal year-end as a combined company. As a testament to this strength as well as the confidence we have in our future growth initiatives, our Board authorized a share repurchase program up to $100 million,” said Chris Morris, Dave & Buster’s Chief Executive Officer. “Fresh off the heels of our annual general manager’s conference, our exceptional team of operators and shared service center employees is motivated and energized to deliver on our goals we’ve set for the business in 2023 and beyond to realize our full potential. We look forward to sharing our progress with you throughout the course of the year as we continue to drive value creation for our stakeholders.”

Fourth Quarter 2022 Results

Total revenue was a record $563.8 million, an increase of 64.3% from $343.1 million in the fourth quarter of 2021 and an increase of 62.4% from $347.2 million in the fourth quarter of 2019. Including the pro forma contribution of Main Event stores in the prior periods, total revenue increased 27.7% versus the fourth quarter of 2021 and increased 30.1% versus the fourth quarter of 2019.

Pro forma combined comparable store sales (including Main Event branded stores) increased 19.0% compared with the fourth quarter of 2021 and increased 14.1% compared with the fourth quarter of 2019. Pro forma combined walk-in comparable store sales increased 12.1% while Special Event comparable store sales increased 89.5% compared with the same period in 2021. Pro forma combined walk-in comparable store sales increased 18.0% while consolidated Special Event comparable store sales declined 6.4% compared with the same period in 2019. Non-comparable store revenue totaled $131.5 million in the fourth quarter.

Operating income totaled $77.2 million, or 13.8% of revenue, compared with operating income of $46.5 million, or 13.6% of revenue in the fourth quarter of 2021 and operating income of $37.6 million, or 10.9% of revenue in the fourth quarter of 2019.

Net income totaled $39.1 million, or 80 cents per diluted share, compared with net income of $25.7 million, or 52 cents per diluted share in the fourth quarter of 2021 and net income of $25.0 million, or 80 cents per diluted share in the fourth quarter of 2019.

Adjusted EBITDA totaled $138.4 million, or 24.5% of revenue, compared with Adjusted EBITDA of $84.9 million, or 24.8% of revenue in the fourth quarter of 2021 and Adjusted EBITDA of $74.8 million, or 21.5% of revenue in the fourth quarter of 2019.

Store operating income before depreciation and amortization totaled $169.1 million, or 30.0% of revenue, compared with store operating income before depreciation and amortization of $101.1 million, or 29.5% of revenue in the fourth quarter of 2021 and store operating income before depreciation and amortization of $96.3 million, or 27.7% of revenue in the fourth quarter of 2019.

Balance Sheet, Liquidity and Cash Flow

The Company generated $143.5 million in operating cash flow during the fourth quarter, ending the quarter with $181.6 million in cash and $491.1 million of availability under its $500 million revolving credit facility, net of $8.9 million in outstanding letters of credit. The Company ended the year with a Net Total Leverage Ratio of 1.9x as defined under its Credit Agreement as the ratio of the aggregate principal amount of any Consolidated Debt less Unrestricted Cash and unrestricted Permitted Investments to Credit Adjusted EBITDA. The Company’s maximum permitted Net Total Leverage Ratio is 3.5x.

“Entering our strongest quarter from a seasonal cash generation perspective with nearly $673 million of liquidity, we are in an enviable position to execute on our long-term new store growth goals, remodel existing stores to drive incremental traffic, and return capital to shareholders,” said Michael Quartieri, Dave & Buster’s Chief Financial Officer. “We’ve completed all the initiatives required to achieve our previously disclosed $25 million synergy target ahead of schedule, which is a testament to the incredible work our team has done to integrate these two great brands. We remain committed to achieving operational excellence and continuous improvement as we progress into the future.”

Share Repurchase Authorization

The Company announced today that its Board of Directors has approved a share repurchase program authorizing the Company to repurchase up to $100 million of its common stock through the end of fiscal 2023. The program may be suspended or discontinued at any time.

Annual Report on Form 10-K Available

The Company’s Annual Report on Form 10-K, will be available at www.sec.gov and on the Company’s investor relations website, contains a thorough review of its financial results for the fiscal year and fourth quarter ended January 29, 2023.

Investor Conference Call and Webcast

Management will hold a conference call to report these results on Tuesday, March 28, 2023, at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). Participants can access the conference call by dialing toll-free (877) 883-0383. The international dial-in for participants is (412) 902-6506. The participant entry number is 5052728. A replay will be available after the call for one year beginning at 6:00 p.m. Central Time (7:00 p.m. Eastern Time) and can be accessed by dialing toll-free (877) 344-7529 or by the international toll number (412) 317-0088; the replay access code 4609682. Additionally, a live and archived webcast of the conference call will be available under the Investor Relations section at www.daveandbusters.com.

About Dave & Buster’s Entertainment, Inc.

Founded in 1982 and headquartered in Coppell, Texas, Dave & Buster’s Entertainment, Inc., is the owner and operator of 207 venues in North America that offer premier entertainment and dining experiences to guests through two distinct brands: Dave & Buster’s and Main Event. The Company has 152 Dave & Buster’s branded stores in 41 states, Puerto Rico, and Canada and offers guests the opportunity to “Eat Drink Play and Watch,” all in one location. Each store offers a full menu of entrées and appetizers, a complete selection of alcoholic and non-alcoholic beverages, and an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised events. The Company also operates 55 Main Event branded stores in 18 states across the country, and offers state-of-the-art bowling, laser tag, hundreds of arcade games and virtual reality, making it the perfect place for families to connect and make memories. For more information about each brand, visit daveandbusters.com and mainevent.com.

Forward-Looking Statements

The Company cautions that this release contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including: our ability to continue as a going concern; our ability to obtain waivers, and thereafter continue to satisfy covenant requirements, under our revolving credit facility; our ability to access other funding sources; our overall level of indebtedness; general business and economic conditions, including as a result of the coronavirus pandemic and any new coronavirus variants; the impact of competition; the seasonality of the Company’s business; adverse weather conditions; future commodity prices; guest and employee complaints and litigation; fuel and utility costs; labor costs and availability; changes in consumer and corporate spending; changes in demographic trends; changes in governmental regulations; unfavorable publicity, our ability to open new stores, and acts of God. Accordingly, actual results may differ materially from the forward-looking statements, and the Company therefore cautions you against relying on such forward-looking statements. Dave & Buster’s intends these forward-looking statements to speak only as of the time of this release and does not undertake to update or revise them as more appropriate information becomes available, except as required by law.

*Non-GAAP Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses the following non-GAAP financial measures: EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, Credit Adjusted EBITDA (calculated in accordance with the Company’s credit agreement, additional details of which can be found in the Company’s Annual Report on Form 10-K), Credit Adjusted EBITDA margin, Store operating income before depreciation and amortization, Store operating income before depreciation and amortization margin, and pro forma financials including Main Event branded stores prior to the Company’s ownership, reconciliations of which can be found on our website (collectively the “non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of our operating performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP measures used by the Company in this press release may be different from the measures used by other companies.

For Investor Relations Inquiries:

Cory Hatton, VP Investor Relations & Treasurer
Dave & Buster’s Entertainment, Inc.
cory.hatton@daveandbusters.com


DAVE & BUSTER’S ENTERTAINMENT, INC.
Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(Unaudited)

  13 Weeks Ended   13 Weeks Ended   13 Weeks Ended
  January 29, 2023   January 30, 2022   February 2, 2020
Food and beverage revenues $ 203,571   36.1 %   $ 120,126   35.0 %   $ 152,797   44.0 %
Amusement and other revenues   360,190   63.9 %     222,976   65.0 %     194,361   56.0 %
Total revenues   563,761   100.0 %     343,102   100.0 %     347,158   100.0 %
                       
Cost of food and beverage (as a percentage of food and beverage revenues)   55,087   27.1 %     32,757   27.3 %     39,124   25.6 %
Cost of amusement and other (as a percentage of amusement and other revenues)   31,965   8.9 %     22,119   9.9 %     20,659   10.6 %
Total cost of products   87,052   15.4 %     54,876   16.0 %     59,783   17.2 %
Operating payroll and benefits   137,776   24.4 %     77,366   22.5 %     83,005   23.9 %
Other store operating expenses   169,857   30.1 %     109,778   32.0 %     108,097   31.1 %
General and administrative expenses   39,053   6.9 %     17,836   5.2 %     20,422   5.9 %
Depreciation and amortization expense   48,972   8.7 %     33,974   9.9 %     35,234   10.1 %
Pre-opening costs   3,835   0.7 %     2,723   0.8 %     3,001   0.9 %
Total operating costs   486,545   86.2 %     296,553   86.4 %     309,542   89.1 %
Operating income   77,216   13.8 %     46,549   13.6 %     37,616   10.9 %
Interest expense, net   30,481   5.4 %     11,939   3.5 %     6,166   1.8 %
Loss on debt extinguishment / refinancing   —   — %     2,788   0.8 %     —   — %
Income before provision for income taxes   46,735   8.4 %     31,822   9.3 %     31,450   9.1 %
Provision for income taxes   7,591   1.3 %     6,172   1.8 %     6,468   1.9 %
Net income $ 39,144   7.1 %   $ 25,650   7.5 %   $ 24,982   7.2 %
                       
Net income per share:                      
Basic $ 0.81       $ 0.53       $ 0.82    
Diluted $ 0.80       $ 0.52       $ 0.80    
Weighted average shares used in per share calculations:                      
Basic shares   48,328,524         48,416,687         30,584,360    
Diluted shares   49,006,140         49,268,800         31,158,919    
                       
Other information:                      
Company-owned stores at end of period   204         144         136    
Store operating weeks in the period   2,641         1,857         1,757    
Total revenue per store operating weeks in the period $ 213       $ 185       $ 198    
                             

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:

  13 Weeks Ended   13 Weeks Ended   13 Weeks Ended
  January 29, 2023   January 30, 2022   February 2, 2020
Net income (loss) $ 39,144   6.9 %   $ 25,650   7.5 %   $ 24,982   7.2 %
Add back: Interest expense, net   30,481         11,939         6,166    
Loss on debt extinguishment / refinancing   —         2,788         —    
Provision (benefit) for income taxes   7,591         6,172         6,468    
Depreciation and amortization expense   48,972         33,974         35,234    
EBITDA   126,188   22.4 %     80,523   23.5 %     72,850   21.0 %
Add back: Loss on asset disposal   157         758         529    
Impairment of long-lived assets and lease termination costs   —         912         —    
Share-based compensation   8,513         2,536         1,378    
Merger & integration costs   2,958         —         —    
Information systems implementation costs and other items   566         207         8    
Adjusted EBITDA, a non-GAAP measure (1) $ 138,382   24.5 %   $ 84,936   24.8 %   $ 74,765   21.5 %

(1)   To more closely align our reported Adjusted EBITDA with recurring operating cash flows, we excluded pre-opening costs from Adjusted EBITDA beginning with the 13 Weeks Ended January 29, 2023. Adjusted EBITDA for the 13 Weeks Ended January 30, 2022 and February 2, 2020 has been adjusted to reflect comparable presentations.

The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:

  13 Weeks Ended   13 Weeks Ended   13 Weeks Ended
  January 29, 2023   January 30, 2022   February 2, 2020
Operating income $ 77,216   13.7 %   $ 46,549   13.6 %   $ 37,616   10.8 %
Add back: General and administrative expenses   39,053         17,836         20,422    
Depreciation and amortization expense   48,972         33,974         35,234    
Pre-opening costs   3,835         2,723         3,001    
Store operating income before depreciation and amortization, a non-GAAP measure $ 169,076   30.0 %   $ 101,082   29.5 %   $ 96,273   27.7 %
                                   


DAVE & BUSTER’S ENTERTAINMENT, INC.

Consolidated Statements of Operations
(in thousands, except share and per share amounts)

  52 Weeks Ended   52 Weeks Ended   52 Weeks Ended
  January 29, 2023   January 30, 2022   February 2, 2020
Food and beverage revenue $ 678,333   34.5 %   $ 436,637   33.5 %   $ 563,576   41.6 %
Amusement and other revenue   1,286,094   65.5 %     867,419   66.5 %     791,115   58.4 %
Total revenue   1,964,427   100.0 %     1,304,056   100.0 %     1,354,691   100.0 %
                       
Cost of food and beverage (as a percentage of food and beverage revenue)   193,742   28.6 %     119,123   27.3 %     148,196   26.3 %
Cost of amusement and other (as a percentage of amusement and other revenue)   115,122   9.0 %     85,848   9.9 %     85,115   10.8 %
Total cost of products   308,864   15.7 %     204,971   15.7 %     233,311   17.2 %
Operating payroll and benefits   470,729   24.0 %     287,263   22.0 %     322,970   23.8 %
Other store operating expenses   600,568   30.6 %     402,661   30.9 %     429,431   31.7 %
General and administrative expenses   137,837   7.0 %     75,501   5.8 %     69,469   5.1 %
Depreciation and amortization expense   169,302   8.6 %     138,329   10.6 %     132,460   9.8 %
Pre-opening costs   14,619   0.7 %     8,150   0.6 %     18,971   1.4 %
Total operating costs   1,701,919   86.6 %     1,116,875   85.6 %     1,206,612   89.0 %
Operating income   262,508   13.4 %     187,181   14.4 %     148,079   11.0 %
Interest expense, net   87,363   4.5 %     53,910   4.2 %     20,937   1.6 %
Loss on debt refinancing / extinguishment   1,479   0.1 %     5,617   0.4 %     —   — %
Income before provision for income taxes   173,666   8.8 %     127,654   9.8 %     127,142   9.4 %
Provision for income taxes   36,531   1.9 %     19,014   1.5 %     26,879   2.0 %
Net income $ 137,135   6.9 %   $ 108,640   8.3 %   $ 100,263   7.4 %
                       
Net income per share:                      
Basic $ 2.83       $ 2.26       $ 3.00    
Diluted $ 2.79       $ 2.21       $ 2.94    
Weighted average shares used in per share calculations:                      
Basic shares   48,498,053         48,142,090         33,450,217    
Diluted shares   49,176,977         49,263,720         34,099,378    
                       
Other information:                      
Company-owned stores at end of period   204         144         136    
Store operating weeks in the period   9,304         7,161         6,769    
Total revenue per store operating weeks in the period $ 211       $ 182       $ 200    
                             

The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods shown:

  52 Weeks Ended   52 Weeks Ended   52 Weeks Ended
  January 29, 2023   January 30, 2022   February 2, 2020
Net income $ 137,135   7.0 %   $ 108,640   8.3 %   $ 100,263   7.4 %
Add back: Interest expense, net   87,363         53,910         20,937    
Loss on debt extinguishment / refinancing   1,479         5,617         —    
Provision (benefit) for income taxes   36,531         19,014         26,879    
Depreciation and amortization expense   169,302         138,329         132,460    
EBITDA   431,810   22.0 %     325,510   25.0 %     280,539   20.7 %
Add back: Loss on asset disposal   769         1,392         1,813    
Impairment of long-lived assets and lease termination costs   1,841         912         —    
Share-based compensation   19,994         12,472         6,857    
Merger & integration costs   25,257         —         —    
Information systems implementation costs and other items   696         3,289         42    
Adjusted EBITDA, a non-GAAP measure (1) $ 480,367   24.5 %   $ 343,575   26.3 %   $ 289,251   21.4 %

(1) To more closely align our reported Adjusted EBITDA with recurring operating cash flows, we excluded pre-opening costs from Adjusted EBITDA beginning with the 52 Weeks Ended January 29, 2023. Adjusted EBITDA for the 52 Weeks Ended January 30, 2022 and February 2, 2020 has been adjusted to reflect comparable presentations.

The following table sets forth a reconciliation of operating income to store operating income before depreciation and amortization for the periods shown:

  52 Weeks Ended   52 Weeks Ended   52 Weeks Ended
  January 29, 2023   January 30, 2022   February 2, 2020
Operating income $ 262,508   13.4 %   $ 187,181   14.4 %   $ 148,079   10.9 %
Add back: General and administrative expenses   137,837         75,501         69,469    
Depreciation and amortization expense   169,302         138,329         132,460    
Pre-opening costs   14,619         8,150         18,971    
Store operating income before depreciation and amortization, a non-GAAP measure $ 584,266   29.7 %   $ 409,161   31.4 %   $ 368,979   27.2 %
                                   

The following table sets forth a reconciliation of Net income to Credit Adjusted EBITDA, as defined in our senior secured credit facility, for the periods shown:

  13 Weeks Ended
January 29, 2023
  52 Weeks Ended
January 29, 2023
Net income $ 39,144   $ 137,135
Add back: Interest expense, net   30,481     87,363
Loss on debt extinguishment / refinancing   —     1,479
Provision for income taxes   7,591     36,531
Depreciation and amortization expense   48,972     169,302
EBITDA   126,188     431,810
Add back: Loss on asset disposal   157     769
Impairment of long-lived assets and lease termination costs   —     1,841
Share-based compensation   8,513     19,994
Pre-opening costs   3,835     14,619
Merger and integration costs   2,958     25,257
Amusement deferrals   6,383     14,853
Proforma Main Event adjustments (1)   —     49,886
Information systems implementation costs and other items   566     696
Credit Adjusted EBITDA, a non-GAAP measure $ 148,600   $ 559,725

(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 senior secured credit facility.

The following table provides a calculation of Net Total Leverage Ratio, as defined in our senior secured credit facility, for the period shown:

  As of and for
Fiscal Year Ended

January 29, 2023
Credit Adjusted EBITDA (a) $ 559,725  
Total long-term debt $ 1,231,211  
Less: Cash and cash equivalents $ (181,591 )
Add: Outstanding letters of credit $ 8,905  
Net debt (b) $ 1,058,525  
Net Total Leverage Ratio (b / a)   1.9  
       


DAVE & BUSTER’S ENTERTAINMENT, INC.

Condensed Consolidated Balance Sheets
(in thousands)

ASSETS January 29, 2023   January 30, 2022
       
Cash and cash equivalents $ 181,591   $ 25,910
Other current assets   112,116     119,661
Total current assets   293,707     145,571
Property and equipment, net   1,180,231     778,597
Operating lease right of use assets   1,333,596     1,037,197
Intangible and other assets, net   953,459     384,425
Total assets $ 3,760,993   $ 2,345,790
       
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
       
Total current liabilities $ 438,037   $ 311,515
Operating lease liabilities   1,567,794     1,277,539
Other long-term liabilities   121,916     49,881
Long-term debt, net   1,222,711     431,395
Stockholders’ equity   410,535     275,460
Total liabilities and stockholders’ equity $ 3,760,993   $ 2,345,790

Alex

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