UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

FOR THE QUARTERLY PERIOD ENDED May 3,November 1, 2015

OR

FOR THE TRANSITION PERIOD FROM                    TO                    

Commission File No. 001-35664

Dave & Buster’s Entertainment, Inc.

(Exact name of registrant as specified in its charter)

2481 Mañana Drive

Dallas, Texas 75220

(Address of principal executive offices) (Zip

(Zip Code)

(214) 357-9588

(Registrant’s telephone number, including area code)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of June 3,December 2, 2015, there were 41,122,53441,511,877 shares of the Issuer’s common stock outstanding.

DAVE & BUSTER’S ENTERTAINMENT, INC.

FORM 10-Q FOR PERIOD ENDED MAY 3,NOVEMBER 1, 2015

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands, except share and per share amounts)

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands, except share and per share amounts)

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements

(in thousands, except share and per share amounts)data)

Note 1: Description of Business and Basis of Presentation

Description of business and basis of presentation— Dave & Buster’s Entertainment, Inc. (“D&B Entertainment” or the “Company”), is a Delaware corporation headquartered in Dallas, Texas. As of May 3,November 1, 2015, Oak Hill Capital Partners III, L.P. and Oak Hill Capital Management Partners, III, L.P. (collectively, the “Oak Hill Funds”) beneficially owned approximately 62.1%24.1% of the Company’s outstanding stock. Certain members of our Board of Directors and our management control approximately 0.9% of our outstanding stock. The remaining 75.0% is owned by the public.

D&B Entertainment owns no significant assets or operations other than the ownership of all the common stock of Dave & Buster’s Holdings, Inc. (“D&B Holdings”). D&B Holdings owns no significant assets or operations other than the ownership of all the common stock of Dave & Buster’s, Inc. (“D&B Inc”). References to the “Company”, “we”, “us”, and “our” refer to D&B Entertainment and its subsidiaries and any predecessor companies. All material intercompany accounts and transactions have been eliminated in consolidation. The Company’s operating activities are conducted through D&B Inc. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.

We operate our business as one operating and one reportable segment. Our one industry segment is the operation of high-volume entertainment and dining venues under the names “Dave & Buster’s” and “Dave & Buster’s Grand Sports Café”. We operate on a 52 or 53 week fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period has 13 weeks, except for a 53 week year when the fourth quarter has 14 weeks. Our fiscal years ending January 31, 2016 (“fiscal 2015”) and February 1, 2015 (“fiscal 2014”), both consist of 52 weeks.

As of November 1, 2015, there were 77 stores in the United States and Canada. During the thirty-nine weeks of fiscal 2015 we opened six new stores, permanently closed our store in Farmingdale (Long Island), New York on February 8, 2015 and closed our store in Williamsville (Buffalo), New York on September 27, 2015. Our store closure in Williamsville, New York was replaced with a new store in Buffalo, New York which opened for business on October 1, 2015. The Buffalo, New York store is included in the six new store openings. On August 12, 2014, we permanently closed our location in Kensington/Bethesda, Maryland.

The following table sets forth our revenues and operating income (loss) for our closed locations for the periods indicated:

In October 2014, we amended and restated our certificate of incorporation to increase our authorized share count to 450,000,000 shares of stock, including 400,000,000 shares of common stock and 50,000,000 shares of preferred stock, each with a par value $0.01 per share and to split our common stock 224.9835679 for 1. On October 9, 2014,Additionally, we completed our initial public offering (the “IPO”) of 5,882,3536,764,705 shares of common stock at a price of $16.00 per share. We granted the underwriters an option to purchase an additional 882,352 shares of common stock, which was exercised in full on October 21, 2014. Unless otherwise noted herein, historic share data has been adjusted to give effect to the stock split.

OnIn February 5, 2015, we completed a follow-on offering of 6,600,0007,590,000 shares of our common stock (including the underwriters overallotment option of 990,000 shares) at a price of $29.50 per share. We granted the underwriters an option to purchase an additional 990,000 shares of our common stock which was exercised in full on February 20, 2015. All of these shares were offered by the selling stockholders. In connection with the offering, 300,151 options were exercised at a weighted average price of $4.49. We issued new shares in satisfaction of this exercise. We received $1,346 upon the exercise of options which were sold as part of this offering.

OnIn May 27, 2015, subsequent to the end of our first quarter, we completed a follow-on offering of 9,775,000 shares of our common stock (including the underwriters overallotment option of 1,275,000 shares) at a price of $31.50 per share. All of these shares were offered by the selling stockholders. In connection with the offering, 853,155 options were exercised at a weighted average price of $4.46. We issued 604,743 new shares and utilized 248,412 treasury shares in satisfaction of this exercise. We received $3,809 upon the exercise of options which were sold as part of this offering.

As

On September 30, 2015, we completed a follow-on offering of May 3, 2015, there6,900,000 shares of our common stock (including the underwriters overallotment option of 900,000 shares) at a price of $37.00 per share. All of these shares were 74 storesoffered by the selling stockholders. In connection with the offering, 366,476 options were exercised at a weighted average price of $4.46. We issued new shares in satisfaction of this exercise. We received $1,633 upon the United Statesexercise of options which were sold as part of this offering.

Other current assets—The balance includes construction allowance receivables of $11,376 and Canada. During the first quarter, we opened new stores in Pelham Manor (metro New York City), New York on April 27,$6,839 as of November 1, 2015, and Euless (Dallas), Texas on May 3,February 1, 2015, and permanently closedrespectively, related to our location in Farmingdale (Long Island), New York (“Farmingdale”) on February 8, 2015. Revenues for our Farmingdalenew store were $110 and $2,365 in the thirteen weeks ended May 3, 2015 and May 4, 2014, respectively. Operating loss for the store was $443 for the thirteen weeks ended May 3, 2015 and operating income was $509 for the same period of fiscal 2014. On August 12, 2014, we permanently closed our location in Kensington/Bethesda, Maryland (“Bethesda”). Revenues for our Bethesda store were $2,912 and operating income was $722 for the thirteen weeks ended May 4, 2014. Subsequentopenings. All receivable amounts are expected to May 3, 2015, we opened new stores in Kentwood (Grand Rapids), Michigan on May 18, 2015 and Woburn (Boston), Massachusetts on May 26, 2015.be collected.

Related party transactions —transactions— Funds managed by Oak Hill Advisors, L.P. (the “OHA Funds”) comprise one of the creditors participating in the term loan portion of our senior secured credit facility. As of May 3, 2015, the OHA Funds held approximately 5.0% or $21,403 of our total term loan obligation. Oak Hill Advisors, L.P. is an independent investment firm that is not an affiliate of the Oak Hill Funds and is not under common control with the Oak Hill Funds. Certain employees of the Oak Hill Funds, in their individual capacities, have passive investments in Oak Hill Advisors, L.P. and/or the funds it manages. Subsequent to May 3, 2015, the Company refinanced its debt and the OHA Funds no longer participate in our term loan. See “Note 3: Long-Term Debt” for further discussions.

As of May 3, 2015, the Oak Hill Funds beneficially own approximately 62.1% of our outstanding stock and certain members of our Board of Directors and our management beneficially own approximately 2.2% of our outstanding stock. The remaining 35.7% is owned by the public. Subsequent to the May 27, 2015 follow-on offering, the Oak Hill Funds beneficially own approximately 40.1% of our outstanding stock and certain members of our Board of Directors and our management beneficially own approximately 1.1% of our outstanding stock.

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (continued)

(in thousands, except share and per share data)

We have an expense reimbursement agreement with Oak Hill Capital Management, LLC (“Oak Hill Capital”), which provides for the reimbursement of certain costs and expenses. We made payments to Oak Hill Capital of $14$13 and $27$44 during the thirteen and thirty-nine weeks ended May 3,November 1, 2015, respectively, and May 4,$7 and $41 during the thirteen and thirty-nine weeks ended November 2, 2014, respectively. We paid compensation of $39$77 and $59$116 during the thirteen and thirty-nine weeks ended May 3,November 1, 2015, respectively, and May 4,$58 and $176 during the thirteen and thirty-nine weeks ended November 2, 2014, respectively, to David Jones who serves as a senior advisor to the Oak Hill Funds, and Alan Lacy, who served as a senior advisor to the Oak Hill Funds until December 2014.

Interim financial statements ——The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Operating results for the thirteen and thirty-nine weeks ended May 3,November 1, 2015 are not necessarily indicative of results that may be expected for any other interim period or for the year ending January 31, 2016. Our quarterly financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended February 1, 2015, included in our Annual Report on Form 10-K as filed with the SEC.

Concentration of credit risk ——Financial instruments which potentially subject us to a concentration of credit risk are cash and cash equivalents. We currently maintain our day-to-day operating cash balances with major financial institutions. At times, our operating cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. From time to time, we invest temporary excess cash in overnight investments with expected minimal volatility, such as money market funds. Although we maintain balances that exceed the FDIC insured limit, we have not experienced any losses related to this balance, and we believe this credit risk to be minimal.

Use of estimates ——The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The Company’s significant estimates include estimates for impairment of goodwill, useful lives of property and equipment, fair value of equity-based compensation, self-insurance reserves, deferred revenue on our Power Cards and gift cards, reserve for outstanding tickets, estimated effective tax rates and deferred tax valuation allowances.

Recent accounting pronouncements— In AprilJuly 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 requires inventory that is recorded using the first-in, first-out method to be measured at the lower of cost or net realizable value. This update is effective for annual and interim periods beginning after December 15, 2016 with early adoption permitted. We do not expect the adoption of ASU 2015-11 to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-05, Intangibles-Goodwill and Other-Internal Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in this update provide guidance to customers as to whether a cloud computing arrangement includes a software license. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. ASU 2015-05 is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest — ImputationInterest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in ASU 2015-03 require the debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU 2015-03 is effective for annual and interim periods beginning on or after December 15, 2015. In August, the FASB issued ASU No. 2015-15, Interest-Imputation of Interest (Subtopic 835-30): Presentation of Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 permits entities to defer and present debt issuance costs related to line-of-credit arrangements as assets. As of May 3,November 1, 2015, if we were to adopt ASU2015-03 $5,987 and ASU 2015-15, $2,990 of net deferred financing costs would be reclassified from “Other assets and deferred charges” to a reduction in the carrying amount of our debt.

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notesdebt, of which $2,101 is related to Consolidated Financial Statements (continued)

(in thousands, except sharea line-of-credit arrangement, and per share data)could be presented as an asset.

Note 2: Accrued Liabilities

Accrued liabilities consist of the following as of:

Note 3: Long-Term Debt

Long-term debt consistedconsists of the following as of:

Senior SecuredNew Credit FacilityFacility——On July 25, 2014, D&B Holdings together with D&B IncMay 15, 2015, we entered into a new senior secured credit facility that provides a $530,000$150,000 term loan facility and a $350,000 revolving credit facility (the “Credit Facility”) with a maturity date of July 25, 2020 and a $50,000 revolving credit facility with a maturity date of July 25, 2019.May 15, 2020. The $50,000$350,000 revolving credit facility includes a $20,000 letter of credit sub-facility and a $5,000$10,000 swingline sub-facility. The revolving credit facility is available to provide financing for general purposes. The term loan facility requires quarterly principal payments of $1,875 which began in the third quarter of fiscal 2015 through maturity, when the remaining balance is due. The Credit Facility is secured by the assets of D&B Inc and is unconditionally guaranteed by D&B Holdings and each of its direct and indirect domestic wholly-owned subsidiaries.

The initial proceeds of the Credit Facility of $434,000 were used to refinance in full the balance of a prior credit facility of $430,000 (the “July 2014 credit facility”) and to pay related interest and expenses. As a result of the current refinancing, we incurred a loss on extinguishment charge of $6,822, consisting of the write-off of unamortized debt issuance costs, unamortized discount and cash paid for related debt fees. Concurrent with the refinance, we utilized $45,000 of available cash on hand to pay down a portion of the outstanding revolving portion of the Credit Facility.

As of November 1, 2015, we had letters of credit outstanding of $5,185 and $137,815 of borrowing available under our Credit Facility. We believe that the carrying amount of the Credit Facility approximates its fair value because the interest rates are adjusted regularly based on current market conditions. The fair value of the Company’s Credit Facility was determined to be a Level Two instrument as defined by GAAP.

The interest rates per annum applicable to loans, other than swingline loans, under our senior secured credit facilitythe Credit Facility are currently set based on a defined LIBOR rate plus an applicable margin. Swingline loans bear interest at a base rate plus an applicable margin. The loans bear interest subject to a pricing grid based on a secured leveraged ratio, at LIBOR plus a spread ranging from 3.25%1.50% to 3.5%2.25% for the term loans and LIBOR plus a spread ranging from 3.0% to 3.5% for the revolving loans. The stated weighted average interest rate on the term loan facilityCredit Facility at May 3,November 1, 2015 was 4.25%2.20%. The weighted average effective interest rate incurred on our borrowings under the senior secured credit facilityCredit Facility was 4.7%2.57%. The weighted average effective rate includes amortization of debt issuance costs, and original issue discount and commitment and other fees.

The senior securedPrior credit facility is secured byfacilities—During the assetssecond quarter of D&B Inc and is unconditionally guaranteed by eachfiscal 2014, proceeds of its direct and indirect, existing and future domestic subsidiaries (with certain agreed-upon exceptions). The Company originally received proceeds$528,675 from the term loan facility of $528,675, net of a $1,325 discount. The discount is being amortized to interest expense over the six-year life of the term loan facility.

Proceeds from the senior securedJuly 2014 credit facility were used to refinance in wholeall the prioroutstanding credit facility and note balances at that time and to pay related premiums, interest and expenses of $30,850. The outstanding credit facility and notes at July 25, 2014 included $143,509 on a senior secured credit facility, (of which $143,509 was outstanding as of July 25, 2014), repay in full $200,000 aggregate principal amount of the 11.0% senior notes due June 1, 2018, repay alland the outstanding 12.25% senior discount notes due February 15, 2016 ($150,193(with a $150,193 accreted value as of

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (continued)

(in thousands, except share and per share data)

July 25, 2014). In the third quarter of fiscal 2014, the Company wrote off $1,586 in unamortized debt costs related to the use of IPO proceeds and pay related premiums, interestavailable cash balances to repay $100,000 principal amount of the July 2014 credit facility and recorded $6 in additional legal expenses of $30,940.in connection with the debt refinancing that took place in second quarter. As a result of the refinancing and prepayment, we incurred a loss on extinguishment charge of $25,992,$27,578, consisting of premiums for early repayment, additional interest charges, and write-off of unamortized debt issue costs and unamortized discount.

Following the IPO, we prepaid $100,000 principal amount of term loan facility. This payment was applied to the future quarterly payments required by the credit agreement. No principal payments are required until the maturity of the credit facility. In conjunction with the prepayment, we incurred a loss on extinguishment charge of $1,586, consisting of the write-off of unamortized deferred debt issuance cost and unamortized discount related to the portion of the term loan that was prepaid.

As of May 3, 2015, we had no borrowings under the revolving credit facility, borrowings of $430,000 ($429,065, net of discount) under the term facility and $5,185 in letters of credit outstanding. We believe that the carrying amount of our term loan facility approximates its fair value because the interest rates are adjusted regularly based on current market conditions. The fair value of the Company’s senior secured credit facility was determined to be a Level Two instrument as defined by GAAP.

Our senior secured credit facility contains restrictive covenants that, among other things, limit our ability and the ability of our subsidiaries to: incur additional indebtedness, make loans or advances to subsidiaries and other entities, make initial capital expenditures in relation to new stores, declare dividends, acquire other businesses or sell assets. In addition, under our senior secured credit facility, we are required to meet a maximum total leverage ratio revolving loans and letters of credit (other than letters of credit that have been backstopped or cash collateralized) are in excess of 30% of the outstanding revolving commitments. As of May 3, 2015, we were not required to maintain any of the financial ratios under the senior secured credit facility and we were in compliance with the other restrictive covenants.

The following tables set forth our recorded interest expense, net for the periods indicated:

Future debt obligations— The following table sets forth our future debt principal payment obligations as of:

Subsequent

The following tables set forth our recorded interest expense, net for the periods indicated:

During fiscal 2015, a note receivable, with an outstanding principal balance of $1,220, was fully collected prior to the end of our first quarter, on May 15, 2015, we entered into a new senior secured credit facility that provides a $150,000 term loan facility and a $350,000 revolving credit facility.scheduled repayment terms. The proceeds of this senior secured credit facility were used to refinance in full the prior senior secured credit facility (of which $430,000 was outstanding) and to pay related interest and expenses. Additionally, we utilized approximately $45,265 of available cash on hand to pay down a portioncarrying value of the new revolving credit facility thatnote was outstanding after payment in full$727, net of discount. Interest expense for the year includes a $493 gain related to the collection of the prior senior secured credit facilitynote receivable.

We are exposed to interest rate risk arising from changes in interest rates due to the variable rate indebtedness under our Credit Facility. In October 2015, the Company purchased an interest rate cap agreement for $920 with a notional amount of $200,000 to manage our exposure to interest rate movements on our variable rate Credit Facility when one-month LIBOR exceeds 3.0%. The effective date of the interest rate cap agreement is October 7, 2015, and the agreement matures on October 7, 2019. We have not designated the interest rate cap as a hedge for accounting purposes. Accordingly, changes in the fair value of the interest rate cap are recognized as interest expense. The Company’s investment in the interest rate cap, with a fair value of $804 at November 1, 2015, is included in other assets on the balance sheet and was valued using an analysis based on market observable inputs, representing Level Two assets as defined by GAAP. The fair value of the Company’s interest rate cap represents the amount the Company would receive to payterminate the contract. For the thirteen and thirty-nine weeks ending November 1, 2015, interest expense includes $116 related fees and expenses.

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (continued)

(the change in thousands, except share and per share data)the fair value of the interest rate cap since purchase.

Note 4: Income Taxes

The following table sets forth our provision (benefit) for income taxes for the periods indicated:

At May 3,November 1, 2015, we had a valuation allowance of $871$842 against our deferred tax assets. The ultimate realization of our deferred tax assets is dependent on the generation of future taxable income in the jurisdiction and during periods in which temporary differences become deductible. In assessing the realizability of our deferred tax assets, at May 3, 2015 we considered whether it is more likely than not that some or all of the deferred tax assets will not be realized. Based on the level of recent historical taxable income; consistent generation of annual taxable income, and estimations of future taxable income we have concluded that it is more likely than not that we will realize the federal tax benefits associated with our deferred tax assets. We assessed the realizability of the deferred tax assets associated with state taxes, foreign taxes and uncertain tax positions and have concluded that it is more likely than not that we will realize only a portion of these benefits. Accordingly, we have established a valuation allowance to reduce those deferred tax assets to an amount which we believe will ultimately be realized. During the first quarter 2015, as a result of our assessment, we reduced our previously established valuation allowance by $60.

As of May 3,November 1, 2015, we had $2,465 remaining available $3,273 federal tax credit carryovers, including $3,210$2,402 of general business credits and $63 of AMTAlternative Minimum Tax (“AMT”) credit carryovers, and $39,619$49,336 of state net operating loss carryforwards. There is a 20 year carry-forward on general business credits and AMT credits can be carried forward indefinitely. The general business credits do not begin to expire until 2030 and are expected to be utilized in fiscal 2015 based on current enacted tax laws. As of May 3,November 1, 2015, we have no federal net operating loss carryforwards. Generally, state net operating losses can be carried forward 20 years. State net operating loss carryforwards do not begin to expire until 2024. As of May 3,November 1, 2015, we could not conclude that it was more likely than not that all of our state net operating loss carryforwards, when considered on a state by state basis, will be fully utilized prior to their expiration. Included in our total valuation allowance is $672$637 related to state net operating losses that may not be realized.

As of May 3,November 1, 2015 and May 4,November 2, 2014, the accrued interest and penalties on the unrecognized tax benefits were $355$388 and $322,$316, respectively, excluding any related income tax benefits. The Company recorded accrued interest related to the unrecognized tax benefits and penalties as a component of the provision for income taxes recognized in the Consolidated Statements of Comprehensive Income.Income (Loss).

We currently anticipate that approximately $14 of unrecognized tax benefits will be settled through federal and state audits or will be recognized as a result of the expiration of statute of limitations during fiscal 2015. Future recognition of potential interest or penalties, if any, will be recorded as a component of income tax expense. Because of the impact of deferred tax accounting, $564$933 of unrecognized tax benefits, if recognized, would affect the effective tax rate.

We file a consolidated income tax returns,return with all our domestic subsidiaries, which are periodically audited by various federal, state and foreign jurisdictions. We are generally no longer subject to federal, state, or foreign income tax examinations for years prior to 2010.

Note 5: Commitments and Contingencies

We are subject to certain legal proceedings and claims that arise in the ordinary course of our business, including claims alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters. In the opinion of management, based upon consultation with legal counsel, the amount of ultimate liability with respect to such legal proceedings and claims will not materially affect the consolidated results of our operations or our financial condition.

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (continued)

(in thousands, except share and per share data)

We lease certain property and equipment under various non-cancelable operating leases. Some of the leases include options for renewal or extension on various terms. Most of the leases require us to pay property taxes, insurance and maintenance of the leased assets. Certain leases also have provisions for additional contingent rentals based on revenues.

The following table sets forth our lease commitments as of May 3,November 1, 2015:

As of November 1, 2015 our signed operating lease agreements included our stores in Friendswood (Houston), Texas and Glendale (Phoenix), Arizona which opened for business on November 16, 2015 and November 23, 2015, respectively. We also have signed operating lease agreements for our stores in Kentwood (Grand Rapids), Michigan, and Woburn (Boston), Massachusetts, which opened for business on May 18, 2015 and May 26, 2015, respectively. We also have a signed lease agreement for a future sitesites located in Edina (Minneapolis)San Antonio, Texas and Springfield (Greater DC), MinnesotaVirginia which isare expected to open in the secondfourth quarter of fiscal 2015.2015 and future sites in Capitol Heights (Baltimore), Maryland, Henrietta (Rochester), New York and El Paso, Texas which are expected to open in the first half of fiscal 2016. The landlord has fulfilled the obligations to commit us to the lease terms under these agreements and therefore, the future obligations related to these locations are included in the table above.

As of May 3,November 1, 2015, we have signed fifteentwelve additional lease agreements for future sites. Our commitments under these agreements are contingent upon among other things, the landlord’s delivery of access to the premises for construction. Future obligations related to these agreements are not included in the table. Subsequent

During the third quarter of fiscal 2015, we purchased two tracts of land for future sites in Florence, Kentucky and Little Rock, Arkansas which are expected to open in the quarter ended May 3, 2015, our future site located in Friendswood (Houston), Texas,first half of fiscal 2016. The combined purchase price of $7,288 is included in the fifteen lease agreements noted above, has been delivered by the landlord resulting in future commitments of approximately $22,511. We also have a signed lease agreement for a future site in Buffalo, New York which will replace an existing location. This site was delivered by the landlord subsequent to the end of the first quarter resulting in additional future commitments of $4,707.property and equipment.

Note 6: Earnings per share

Basic earnings per share (“EPS”) represents net income divided by the weighted average number of common shares outstanding during the period. Diluted EPS represents net income divided by the basic weighted average number of common shares plus, if dilutive, potential common shares outstanding during the period. Potential common shares consist of incremental common shares issuable upon the exercise of outstanding stock options or the fulfillment of restricted and performance share vesting conditions. The dilutive effect of potential common shares is determined using the treasury stock method, whereby outstanding stock options are assumed exercised at the beginning of the reporting period and the exercise proceeds from such stock options, the average measured but unrecognized compensation cost during the period and certain tax benefits that will be credited to additional paid-in capital upon exercise are assumed to be used to repurchase our common stock at the average market price during the period.

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (continued)

(in thousands, except share and per share data)

The following table setstables set forth the computation of EPS, basic and diluted for the periods indicated:

We had approximately 4,397,5753,160,844 and 2,167,4924,441,257 time-based and vested performance-based stock option awards outstanding under our stock option plans as of May 3,November 1, 2015 and May 4,November 2, 2014, respectively, which were included in the computation of potentialdilutive common shares. Unvested performance-based stock options under our stock option plans were not included in the calculation of potentialdilutive common shares as they did not meet the criteria for inclusion per GAAP guidance.

Note 7: Equity-based Compensation

As of May 3,November 1, 2015, options to purchase 4,397,5753,160,844 shares of common stock were outstanding; including 3,217,350outstanding, of which 2,231,941 were vested and 1,180,225928,903 were unvested. Current unvested options vest over time. All performance-based options vested

Forfeitures are estimated at the time of grant and adjusted, if necessary, in connection with our IPO.subsequent periods if actual forfeitures differ from those estimates. The forfeiture rate is based on historical experience.

For the thirteen and thirty-nine weeks ended May 3,November 1, 2015, there were exercises of stock options for 300,151378,544 and 1,531,850 shares, respectively. For the thirteen and thirty-nine weeks ended November 1, 2015, there were forfeitures of stock options for 5,032 shares. There were no stock option grants in the thirteen weeks ended November 1, 2015 and stock option grants of 258,709 in the thirty-nine weeks ended November 1, 2015. All stock options and 71,741 sharesgranted during fiscal 2015 are time-based options. There were restricted stock grants during the first quarter of restricted stock. Restricted stock grants2015, which included 10,799 time-based shares granted to certain Board of Director members and 60,942 performance sharesperformance-based restricted stock units granted to management and certain other employees of the company. All stock options granted during fiscal 2015 are time-based options.

As of May 3,Company. During the thirteen and thirty-nine weeks ended November 1, 2015 there were 71,741forfeitures of performance-based restricted shares outstanding. stock units for 1,218 shares.

Restricted shares vest over time or upon the Company achieving certain financial goals. We base the amount of unearned compensation recorded for restricted shares on the market value of the shares on the date of issuance.

As of May 3,November 1, 2015, we had total unrecognized compensation expense of $8,496,$6,126, related to unvested stock options and restricted shares, which we expect to recognize over a weighted-average period of 2.62.2 years.

Total stock-based compensation expense was $549$969 and $1,361 for the thirteen weeks ended May 3,November 1, 2015 and November 2, 2014 and was $274$2,590 and $1,864 for the thirteenthirty-nine weeks ended May 4, 2014.

DAVE & BUSTER’S ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (continued)

(in thousands, except shareNovember 1, 2015 and per share data)

November 2, 2014, respectively.

2014 Stock Incentive Plan

The 2014 Omnibus Incentive Plan (“2014 Stock Incentive Plan”) allows the granting of incentive and nonqualified stock options, stock appreciation rights, restricted stock, other stock-based awards and cash-based awards to employees, directors, and consultants of the Company. The maximum number of shares of common stock issuable under the 2014 Stock Incentive Plan is 3,100,000 shares. The term of service-based stock options is determined at the date of grant. Performance-based stock options can be based upon a variety of performance measures as defined in the plan document. Each award agreement will specify the effect of a holder’s termination of employment with, or service for, the Company. Options granted under the 2014 Stock Incentive Plan terminate on the ten-year anniversary of the grants.date of grant.

2010 Stock Incentive Plan

The Dave & Buster’s Entertainment, Inc. 2010 Management Incentive Plan (“2010 Stock Incentive Plan”) providesprovided for the granting of options to acquire stock in D&B Entertainment to certain of our employees, outside directors and consultants. The options are subject to either time-based vesting or performance-based vesting. Options granted under the 2010 Stock Incentive Plan terminate on the ten-year anniversary of the grants.

Options provided fordate of grant. All performance-based options outstanding prior to our IPO were vested in connection with our IPO. Upon adoption of the 2014 Stock Incentive Plan, no further grants are permitted under the 2010 Stock Incentive Plan are subject to the grantee’s continued employment with or service to D&B Entertainment or its subsidiaries (subject to certain conditions in the event of grantee termination). Service-based options contain a service-based (or time-based) vesting provision, whereby the options will vest annually in equal amounts. Performance based options contain various performance-based vesting provisions depending on the type of performance option granted. As a result of the IPO, all unvested performance-based shares were modified and became fully vested.Plan.

Additionally as a result of the IPO, all stock option awards granted prior to the IPO were adjusted to affect the 224.9835679 for 1 stock split on both number of outstanding options and the exercise price. No further grants of equity or other awards will be made under the 2010 Stock Incentive Plan.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with the accompanying unaudited consolidated financial statements and the related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K as filed with the SEC.Securities and Exchange Commission (“SEC”). Unless otherwise specified, the meaning of all defined terms in Management’s Discussion and Analysis are consistent with the meanings of such terms as defined in the Notes to Consolidated Financial Statements. This discussion contains statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this quarterly report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this quarterly report as a result of various factors, including those set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”)SEC on April 7, 2015. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

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. Founded in 1982, the core of our concept is to offer our customers the opportunity to “Eat“Eat Drink Play and Watch” all in one location. Eat and Drink are offered through a full menu of “Fun“Fun American New Gourmet” entrées and appetizers and a full selection of non-alcoholic and 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 customers are a balancedcustomer mix of men and women,skews moderately to males, primarily aged between the ages of 21 and 39, and we believe we also serve as an attractive venue for families with children 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 44,000 square feet, range in size between 16,000 and 66,000 square feet and are open seven days a week, with hours of operation typically from 11:30 a.m. to midnight on Sunday through Thursday and 11:30 a.m. to 2:00 a.m. on Friday and Saturday.

As of November 1, 2015, the Company had a total of 41,511,877 common shares outstanding (consisting of 41,501,078 common shares and 10,799 unvested restricted shares). No preferred shares were issued or outstanding. Oak Hill Capital Partners III, L.P. and Oak Hill Capital Management Partners, III, L.P. (collectively, the “Oak Hill Funds”) own approximately 24.1% of our outstanding stock and certain members of our Board of Directors and our management control approximately 0.9% of our outstanding common stock. The remaining 75.0% is owned by the public.

Dave & Buster’s Entertainment, Inc. (“D&B Entertainment”) has no material assets or operations other than 100% ownership of the outstanding common stock of Dave & Buster’s Holdings, Inc. (“D&B Holdings”). D&B Holdings has no material assets or operations other than 100% ownership of the outstanding common stock of Dave & Buster’s, Inc. (“D&B Inc”). As such, the following discussion, unless specifically identified otherwise, addresses the operations of D&B Inc.

Our Growth Strategies and Outlook

Our growth is based primarily on the following strategies:

We intend for new store expansion to be a key growth driver. Our long-term plan is to open new stores at an annual rate of approximately 10% of our existing stores. During the first thirteenthirty-nine weeks of fiscal 2015, the Company opened twosix new stores.stores including the relocation of an existing store in Williamsville (Buffalo), New York to a new site in the same market. As of May 3,November 1, 2015, there were 74 company-owned77 stores in the UnitesUnited States and Canada. Subsequent to the end of our firstthird quarter, we opened new stores in Kentwood (Grand Rapids)Friendswood (Houston), MichiganTexas on May 18,November 16, 2015 and Woburn (Boston)Glendale (Phoenix), MassachusettsArizona on May 26,November 23, 2015 and plan to open an additional 3 to 42 stores in fiscal 2015. To increase comparable store sales we plan to provide our customers with the latest exciting games by updating approximately 10% of our games each year, leverage the D&B Sports concept by building awareness through national cable advertising and drive customer frequency by enhancing the in-store and out-of-store customer experience via digital and mobile strategic initiatives.

We believe that in addition to the growth potential that exists in North America, the Dave & Buster’s brand can also have significant appeal in certain international markets. Our goal is to sign anWe have recently signed a seven store franchise agreement with our first international partner byfor licensed development in the end of fiscal 2015,Middle East, which includes six countries, and we are targeting our first international opening outside of Canada in 2016.2017.

We believe that we are well positioned for growth with a corporate infrastructure that can support a larger store base than we currently have, and that we will benefit from economies of scale as we expand.

For further information about our growth strategies and outlook, see the section entitled “Business —– Our Growth Strategies” in our Annual Report on Form 10-K filed with the SEC.

Key Events

On July 25, 2014, we entered into a senior secured credit facility that provides a $530,000 term loan facility and a $50,000 revolving credit facility. The proceeds of the new senior secured credit facility were used to refinance in whole the prior senior secured credit facility (of which $143,509 was outstanding as of July 25, 2014), repay in full $200,000 aggregate principal amount of the 11.0% senior notes due June 1, 2018, repay all outstanding 12.25% senior discount notes due February 15, 2016 ($150,193 accreted value as of July 25, 2014) and pay related premiums for early redemption, interest and expenses. In connection with the our initial public offering (“the IPO”), we prepaid $100,000 principal amount of our senior secured credit facility

In October 2014, we amended and restated our certificate of incorporation to increase our authorized share count to 450,000,000 shares of stock, including 400,000,000 shares of common stock and 50,000,000 shares of preferred stock, each with a par value of $0.01 per share and to split our common stock 224.9835679 for 1. On October 9, 2014,Additionally, we completed our IPOinitial public offering, (the “IPO”) of 5,882,3536,764,705 shares of common stock at a price of $16.00 per share. We granted the underwriters an option to purchase an additional 882,352 shares of common stock, which was exercised in full on October 21, 2014. Unless otherwise noted herein, historic share data has been adjusted to give effect to the stock split.

OnIn February 5, 2015, we completed a follow-on offering of 6,600,000a total of 7,590,000 shares of our common stock (including the underwriters overallotment option of 990,000 shares) at a price of $29.50 per share. We granted the underwriters an option to purchase an additional 990,000 shares of our common stock which was exercised in full on February 20, 2015. All of these shares were offered by the selling stockholders. In connection with the offering, 300,151 options were exercised at a weighted average price of $4.49. We issued new shares in satisfaction of this exercise. We received $1,346 upon the exercise of options which were sold as part of this offering.

As of May 3, 2015, the Company had a total of 40,269,379 common shares outstanding and no preferred shares issued and outstanding. Oak Hill Funds beneficially owned approximately 62.1% of our outstanding stock and certain members of our Board of Directors and our management beneficially owned approximately 2.2% of our outstanding stock. The remaining 35.7% was owned by the public.

On May 15, 2015, we entered into a new senior secured credit facility that provides a $150,000 term loan facility and a $350,000 revolving credit facility.facility (the “Credit Facility”). The proceeds of this senior secured credit facilitythe Credit Facility were used to refinance in full the balance of a prior senior secured credit facility (of whichof $430,000 was outstanding)(the “July 2014 credit facility”) and to pay related interest and expenses. After completion of the refinancing on May 15, 2015, we had total debt and letters of credit outstanding of $389,000 and $5,185, respectively and $105,815 of borrowing available under our senior secured credit facility. As a result of the refinancing, we expect to have lower interest expense.

OnIn May 27, 2015, subsequent to the end of our first quarter, we completed a follow-on offering of 9,775,000 shares of our common stock (including the underwriters overallotment option of 1,275,000 shares) at a price of $31.50 per share. All of these shares were offered by the selling stockholders. In connection with the offering, 853,155 options were exercised at a weighted average price of $4.46. We issued 604,743 new shares and utilized 248,412 treasury shares, in satisfaction of this exercise. We received $3,809 upon the exercise of options which were sold as part of this offering. Subsequent to the

On September 30, 2015, we completed a follow-on offering transactions, the Oak Hill Funds beneficially own approximately 40.1%of 6,900,000 shares of our outstandingcommon stock and certain members(including the underwriters overallotment option of our Board900,000 shares) at a price of Directors and our management beneficially own approximately 1.1%$37.00 per share. All of our outstanding common stock. The remaining 58.8% is ownedthese shares were offered by the public.

Dave & Buster’s Entertainment, Inc. (“D&B Entertainment”) has no material assets or operations other than 100% ownershipselling stockholders. In connection with the offering, 366,476 options were exercised at a weighted average price of $4.46. We issued new shares in satisfaction of this exercise. We received $1,633 upon the outstanding common stockexercise of Dave & Buster’s Holdings, Inc. (“D&B Holdings”). D&B Holdings has no material assets or operations other than 100% ownershipoptions which were sold as part of the outstanding common stock of Dave & Buster’s, Inc. (“D&B Inc”). As such, the following discussion, unless specifically identified otherwise, addresses the operations of D&B Inc.this offering.

Key Measures of Our Performance

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

Comparable store sales— Comparable store sales are a year-over-year comparison of sales at stores open at the end of the period which have been opened for at least 18 months as of the beginning of each of the fiscal years. It is a key performance indicator used within the industry and is indicative of acceptance of our initiatives as well as local economic and consumer trends. Our comparable stores consisted of 6059 and 57 stores as of May 3,November 1, 2015 and May 4,November 2, 2014, respectively. Fiscal 2015 comparableComparable store sales for the thirteen and thirty-nine weeks ended November 1, 2015 exclude sales from our Williamsville (Buffalo), New York location, which closed and relocated in the third quarter of fiscal 2015, and our Farmingdale (Long Island), NYNew York (“Farmingdale”) location, which permanently closed on February 8, 2015. Fiscal 2014 comparable store sales exclude sales from our Kensington/Bethesda, Maryland (“Bethesda”) location, which permanently closed on August 12, 2014.

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.

Our new locations typically open with sales volumes in excess of their run-rate levels, which we refer to as a “honeymoon” effect. We expect our new store volumes in year two to be 15% to 20% lower and to grow in line with the rest of our comparable store base thereafter. We also expect our Store-level Adjusted EBITDA margins to be two to five percentage points lower in the second full year of operations than our year one targets.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 and the seasonality of our business, the number and timing of new store openings will result in significant fluctuations in quarterly results.

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 Store-level EBITDA, Store-level EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin. 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. Because Adjusted EBITDA does not account for these expenses, its utility as a measure of our operating performance has material limitations. In addition, Adjusted EBITDA excludes pre-opening costs and adjustments for changes in the accruals for deferred amusement revenue and ticket liability, which we expect customers to redeem in future periods and which may be important in analyzing our GAAP results. 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 current underlying business of our stores and therefore complicate comparison of underlying business between periods. Nevertheless, becauseBecause of the limitations described above management does not view Adjusted EBITDA in isolation and also uses other measures, such as net sales, gross margin, operating income and net income (loss), to measure operating performance.

Store-level EBITDA and Store-level EBITDA Margin— We define “Store-level EBITDA” as net income (loss), plus interest expense, net, loss on debt retirement, provision (benefit) for income taxes, depreciation and amortization expense, general and administrative expenses and pre-opening costs. “Store-level EBITDA Margin” is defined as Store-level EBITDA divided by total revenues. Store-level EBITDA Margin allows us to evaluate operating performance of each store across stores of varying size and volume.

We believe that Store-level EBITDA 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-level EBITDA 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-level EBITDA 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 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.

Adjusted EBITDA and Adjusted EBITDA Margin— We define “Adjusted EBITDA” as net income (loss), plus interest expense, net, loss on debt retirement, provision (benefit) for income taxes, depreciation and amortization expense, loss on asset disposal, share-based compensation, currency transaction (gain) loss, pre-opening costs, reimbursement of affiliate and other expenses, change in deferred amusement revenue and ticket liability estimations, transaction costs and other. “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 regarding our operating performance and our capacity to incur and service debt and fund capital expenditures. We believe that Adjusted EBITDA is used by many investors, analysts and rating agencies as a measure of performance. In addition, Adjusted EBITDA is approximately equal to “EBITDA” as defined in our senior credit facilityCredit Facility and our presentation of Adjusted EBITDA is consistent with that reported to our lenders

to allow for leverage-based assessments. 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. Adjusted EBITDA is a metric historically utilized to measure performance-based bonuses paid to our executive officers and certain managers.

Presentation of Operating Results

We operate on a 52 or 53 week fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarter consists of 13 weeks, except for a 53 week year when the fourth quarter consists of 14 weeks. All references to the firstthird quarter of 2015 relate to the 13 week period ended May 3,November 1, 2015. All references to the firstthird quarter of 2014 relate to the 13 week period ended May 4,November 2, 2014. All references to the year-to-date fiscal 2015 period relate to the thirty-nine week period ended November 1, 2015. All references to the year-to-date fiscal 2014 period relate to the thirty-nine week period ended November 2, 2014. Both our 2015 fiscal year and 2014 fiscal year consist of 52 weeks. All dollar amounts are presented in thousands, except share and per share amounts.

Key Line Item Descriptions

Revenues— Total revenues consist of food and beverage revenues as well as amusement and other revenues. Beverage revenues refer to alcoholic beverages. For the thirteen weeks ended May 3,November 1, 2015, we derived 31.1%31.2% of our total revenue from food sales, 15.4% from beverage sales, 52.8%52.7% from amusement sales and 0.7% from other sources. For the thirty-nine weeks ended November 1, 2015, we derived 31.3% of our total revenue from food sales, 14.9% from beverage sales, 53.0% from amusement sales and 0.8% from other sources. Our revenue growth is primarily influenced by the number of new store openings and growth in comparable store revenues. Comparable store revenue growth reflects the change in year-over-year revenue for the comparable store base and is an important measure of store performance. Comparable store sales growth can be generated by increases in average dollars spent per customer and improvements in customer traffic.

We continually monitor the success of current food and beverage items, the availability of new menu offerings, the menu price structure and our ability to adjust prices where competitively appropriate. With respect to the beverage component, we operate fully licensed facilities, which means that we offer full beverage service, including alcoholic beverages, throughout each store.

Our stores also offer an extensive array of amusements and entertainment options, with typically over 150 redemption and simulation games. We also offer traditional pocket billiards and shuffleboard. Redemption games offer our customers the opportunity to win tickets that can be redeemed for prizes in the Winner’s Circle, ranging from branded novelty items to high-end home electronics. Our redemption games include basic games of skill, such as skeeball and basketball, as well as competitive racing, and individual electronic games of skill. We review the amount of game play on existing amusements in an effort to match amusements availability with customer preferences. We intend to continue to invest in new games as they become available and prove to be attractive to our customers. Our unique venue allows us to provide our customers with value driven food and amusement combination offerings including our Eat & Play Combo (a promotion that provides a discounted Power Card in combination with select entrées), Super Charge Power Card offerings (when purchasing or adding value to a Power Card, the customer is given the opportunity to add more chips to the Power Card at a lower cost per chip amount), Half-Price Game Play (every Wednesday, from open to close, we reduce the price of every game in the Midway by one-half), and “Everyone’s a Winner” (a limited-time offer providing a prize to every customer that purchases or adds value to a Power Card in the amount of $10 or more). We also offer various food and beverage discounts during key sports viewing times. In addition, from time to time we have limited time offers which allow our customers to play certain new games for free as a way to introduce those new games.

Our D&B Sports concept, currently incorporated in approximately 70% of our store base, provides an attractive opportunity to market our broader platform to new and existing customers through a year-round calendar of programming and promotions tied to popular sporting events and sport-related activities. Large television screens, comfortable seating, a full menu of food and beverages and artwork often featuring images of local sports teams and sports icons help create an exciting environment for watching sports programming.

The special events portion of our business represented 8.5%9.2% of our total revenues for the thirteenthirty-nine weeks ended May 3,November 1, 2015. We believe our special events business is an important sampling and promotional opportunity for our customers because many customers are experiencing Dave & Buster’s for the first time. Accordingly, a considerable emphasis is placed on the special events portion of our business.

Cost of products— Cost of products includes the cost of food, beverages and the Winner’s Circle redemption items. For the thirteen weeks ended May 3,November 1, 2015, the cost of food products averaged 27.0%27.4% of food revenue and the cost of beverage products averaged 23.5%23.9% of beverage revenue. The amusement and other cost of products averaged 13.2%12.5% of amusement and other revenues. For the thirty-nine weeks ended November 1, 2015, the cost of food products averaged 27.2% of food revenue and the cost of beverage products averaged 23.7% of beverage revenue. The amusement and other cost of products averaged 12.8% of amusement and other revenues. The cost of products is driven by product mix and pricing movements from third-party suppliers. We continually strive to gain efficiencies in both the acquisition and use of products while maintaining high standards of product quality.

Operating payroll and benefits —Operating payroll and benefits consist of wages, employer taxes and benefits for store personnel. We continually review the opportunity for efficiencies, principally through scheduling refinements.

Other store operating expenses —Other store operating expenses consist primarily of store-related occupancy, supply and outside service expenses, utilities, repair and maintenance and marketing and promotional costs.

General and administrative expenses — General and administrative expenses consist primarily of personnel, facilities and professional expenses for the various departments of our corporate headquarters.

Depreciation and amortization expense — Depreciation and amortization expense includes the depreciation of fixed assetsproperty and equipment and the amortization of trademarks with finite lives.

Pre-opening costs — Pre-opening costs include costs associated with the opening and organizing of new stores, including pre-opening rent (rent expense recognized during the period between date of possession and the store’s opening date), staff training and recruiting, and travel costs for employees engaged in such pre-opening activities.

Interest expense — Interest expense includes the cost of our debt obligations including the amortization of loan fees and original issue discounts, net of any interest income earned or interest expense capitalized.capitalized and the change in the fair value of the interest rate cap.

Loss on debt retirement — Loss on debt retirement consists of the write-off of unamortized loan costs and other fees associated with the refinancing of our debt.

Provision (benefit) for income taxes — Provision (benefit) for income taxes represents federal, state, and foreign current and deferred income tax provision.taxes for federal, state, and foreign.

Liquidity and Cash Flows

The primary source of cash flow is from our operating activities and availability under the revolving credit facility.

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.

We also expect seasonality to be a factor in the operation or results of the business in the future with higher first and fourth quarter revenues associated with the spring and year-end holidays. These quarters will continue to be susceptible to the impact of severe 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 the other quarters.

We expect that volatile economic conditions 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 or state minimum wage rates will not increase beyond amounts currently legislated, the effects of any supplier price increases or minimum wage rate increases are expected to be partially offset by selected menu price increases where competitively appropriate.

Thirteen Weeks Ended May 3,November 1, 2015 Compared to Thirteen Weeks Ended May 4,November 2, 2014

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.income (loss).

Reconciliations of Non-GAAP Financial Measures—EBITDA and Adjusted EBITDA

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