Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
 
Form
10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AugustMay 1, 20212022
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
        
    
    
    
TO
    
        
    
    
Commission File
No. 001-35664
 
Dave & Buster’s Entertainment, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
35-2382255
(State of Incorporation)
 
(I.R.S. Employer ID)
2481 Mañana Drive, Dallas,1221 Beltline Rd., Coppell, Texas, 75220
75019
 
(214)
357-9588
(Address of principal executive offices) (Zip Code)
 
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange

on which registered
Common Stock $0.01 par value
 
PLAY
 
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
 
 
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer   Accelerated filer 
Non-accelerated
filer
   Smaller reporting company 
Emerging Growth Company    
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2
of the Exchange Act).    Yes  ☐    No  ☒
As of September 3, 2021,May 31, 2022, the registrant had 48,256,375ha
d
 48,934,844 shares of common stock, $0.01 par value per share, outstanding.outstanding
.
 
 
 

DAVE & BUSTER’S ENTERTAINMENT, INC.
FORM
10-Q
FOR QUARTERLY PERIOD ENDED AUGUSTMAY 1, 20212022
TABLE OF CONTENTS
 
     
Page
 
PART I
   
Item 1.
    3 
Item 2.
    1813 
Item 3.
    3122 
Item 4.
    3222 
PART II
   
Item 1.
    3222 
Item 1A.
    3222 
Item 2.
    3324 
Item 6.
    3425 
    3526 
 
2

PART I – FINANCIAL INFORMATION
 
Item 1 .1.
Financial Statements
DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
  
August 1,
 
January 31,
   
May 1,
 
January 30,
 
2021
 
2021
 
2022
 
2022
 
  
(unaudited)
 
(audited)
   
(unaudited)
 
(audited)
 
ASSETS
           
Current assets:
          
Cash and cash equivalents
  $107,801  $11,891   $139,081  $25,910 
Inventories
   23,811   23,807    41,601   40,319 
Prepaid expenses
   10,673   11,878    16,403   11,316 
Income taxes receivable
   51,639   70,064    16,697   64,921 
Other current assets
   2,031   1,231    3,358   3,105 
  
 
  
 
   
 
  
 
 
Total current assets
   195,955   118,871    217,140   145,571 
Property and equipment (net of $862,568 and $798,804 accumulated depreciation as of August 1, 2021 and January 31, 2021, respectively)
   785,227   815,027 
Property and equipment (net of $937,939 and $908,536 accumulated depreciation as of May 1, 2022 and January 30, 2022, respectively)
   787,750   778,597 
Operating lease right of use assets
   1,018,558   1,037,569    1,055,328   1,037,197 
Deferred tax assets
   7,313   5,874    9,203   9,961 
Tradenames
   79,000   79,000    79,000   79,000 
Goodwill
   272,570   272,597    272,604   272,597 
Other assets and deferred charges
   25,882   23,886    22,075   22,867 
  
 
  
 
   
 
  
 
 
Total assets
  $2,384,505  $2,352,824   $2,443,100  $2,345,790 
  
 
  
 
   
 
  
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
           
Current liabilities:
          
Accounts payable
  $34,227  $36,400   $54,528  $62,493 
Accrued liabilities
   272,062   234,790    254,920   248,493 
Income taxes payable
   2,644   446    3,630   529 
  
 
  
 
   
 
  
 
 
Total current liabilities
   308,933   271,636    313,078   311,515 
Deferred income taxes
   11,405   13,658    15,446   12,012 
Operating lease liabilities
   1,248,038   1,267,791    1,294,486   1,277,539 
Other liabilities
   48,438   50,119    36,382   37,869 
Long-term debt, net
   537,816   596,388    431,966   431,395 
Commitments and contingencies
   0   0    0   0 
Stockholders’ equity:
          
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 61,276,473 shares at August 1, 2021 and 60,488,833 shares at January 31, 2021; outstanding: 48,256,375 shares at August 1, 2021 and 47,646,606 shares at January 31, 2021
   613   605 
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 61,817,849 shares at May 1, 2022 and 61,563,613 shares at January 30, 2022; outstanding: 48,718,457 shares at May 1, 2022 and
48,489,935
shares at January 30, 2022
   618   616 
Preferred stock, 50,000,000 authorized; NaN issued
   0—      0—       0—     0—   
Paid-in
capital
   540,348   531,191    557,977   548,776 
Treasury stock, 13,020,098 and 12,842,227 shares as of August 1, 2021 and January 31, 2021, respectively
   (603,686  (595,970
Treasury stock, 13,099,392 and 13,073,678 shares as of May 1, 2022 and January 30, 2022, respectively
   (606,669  (605,435
Accumulated other comprehensive loss
   (6,296  (9,085   (2,299  (3,628
Retained earnings
   298,896   226,491    402,115   335,131 
  
 
  
 
   
 
  
 
 
Total stockholders’ equity
   229,875   153,232    351,742   275,460 
  
 
  
 
   
 
  
 
 
Total liabilities and stockholders’ equity
  $2,384,505  $2,352,824   $2,443,100  $2,345,790 
  
 
  
 
   
 
  
 
 
See accompanying notes to consolidated financial statements.statements
.
 
3

DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands, except share and per share amounts)
 
  
Thirteen Weeks
 
Thirteen Weeks
   
Thirteen Weeks
 
Thirteen Weeks
 
Ended
 
Ended
 
Ended
 
Ended
 
August 1, 2021
 
August 2, 2020
 
May 1, 2022
 
May 2, 2021
 
Food and beverage revenues
  $123,006  $17,002   $151,912  $85,758 
Amusement and other revenues
   254,632   33,831    299,189   179,582 
  
 
  
 
   
 
  
 
 
Total revenues
   377,638   50,833    451,101   265,340 
Cost of food and beverage
   33,127   4,659    43,255   23,157 
Cost of amusement and other
   24,584   4,025    26,766   16,614 
  
 
  
 
   
 
  
 
 
Total cost of products
   57,711   8,684    70,021   39,771 
Operating payroll and benefits
   80,623   13,756    93,361   50,279 
Other store operating expenses
   105,116   62,682    124,425   84,445 
General and administrative expenses
   18,470   9,278    28,297   17,091 
Depreciation and amortization expense
   34,875   35,160    33,288   35,099 
Pre-opening
costs
   1,676   2,388    2,997   1,659 
  
 
  
 
   
 
  
 
 
Total operating costs
   298,471   131,948    352,389   228,344 
  
 
  
 
   
 
  
 
 
Operating income (loss)
   79,167   (81,115
Operating income
   98,712   36,996 
Interest expense, net
   13,728   8,163    11,391   14,820 
  
 
  
 
   
 
  
 
 
Income (loss) before provision (benefit) for income taxes
   65,439   (89,278
Provision (benefit) for income taxes
   12,669   (30,676
Income before provision for income taxes
   87,321   22,176 
Provision for income taxes
   20,337   2,541 
  
 
  
 
   
 
  
 
 
Net income (loss)
   52,770   (58,602
Net income
   66,984   19,635 
  
 
  
 
   
 
  
 
 
Unrealized foreign currency translation gain (loss)
   (15  304    (42  61 
Unrealized gain on derivatives, net of tax
   1,372   1,372    1,371   1,371 
  
 
  
 
   
 
  
 
 
Total other comprehensive income
   1,357   1,676    1,329   1,432 
  
 
  
 
   
 
  
 
 
Total comprehensive income (loss)
  $54,127  $(56,926
Total comprehensive income
  $68,313  $21,067 
  
 
  
 
   
 
  
 
 
Net income (loss) per share:
     
Net income per share:
     
Basic
  $1.10  $(1.24  $1.38  $0.41 
Diluted
  $1.07  $(1.24  $1.35  $0.40 
Weighted average shares used in per share calculations:
          
Basic
   48,178,611   47,111,763    48,580,273   47,695,705 
Diluted
   49,229,817   47,111,763    49,453,503   49,331,092 
See accompanying notes to consolidated financial statements.
statements
.

4
4

DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands, except share and per share amounts)
   
Twenty-Six Weeks
   
Twenty-Six Weeks
 
  
Ended
   
Ended
 
  
August 1, 2021
   
August 2, 2020
 
Food and beverage revenues
  $208,764   $80,922 
Amusement and other revenues
   434,214    129,717 
   
 
 
   
 
 
 
Total revenues
   642,978    210,639 
Cost of food and beverage
   56,284    22,003 
Cost of amusement and other
   41,198    14,753 
   
 
 
   
 
 
 
Total cost of products
   97,482    36,756 
Operating payroll and benefits
   130,902    57,493 
Other store operating expenses
   189,561    158,354 
General and administrative expenses
   35,561    23,841 
Depreciation and amortization expense
   69,974    70,512 
Pre-opening
costs
   3,335    6,211 
   
 
 
   
 
 
 
Total operating costs
   526,815    353,167 
   
 
 
   
 
 
 
Operating income (loss)
   116,163    (142,528
Interest expense, net
   28,548    14,278 
   
 
 
   
 
 
 
Income (loss) before provision (benefit) for income taxes
   87,615    (156,806
Provision (benefit) for income taxes
   15,210    (54,660
   
 
 
   
 
 
 
Net income (loss)
   72,405    (102,146
   
 
 
   
 
 
 
Unrealized foreign currency translation gain (loss)
   46    (131
Unrealized gain (loss) on derivatives, net of tax
   2,743    (3,577
   
 
 
   
 
 
 
Total other comprehensive income (loss)
   2,789    (3,708
   
 
 
   
 
 
 
Total comprehensive income (loss)
  $75,194   $(105,854
   
 
 
   
 
 
 
Net income (loss) per share:
          
Basic
  $1.51   $(2.59
Diluted
  $1.47   $(2.59
Weighted average shares used in per share calculations:
          
Basic
   47,937,158    39,470,874 
Diluted
   49,272,693    39,470,874 
See accompanying notes to consolidated financial statements.
5

DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands, except share amounts)
   
Thirteen Weeks Ended August 1, 2021
 
                      
Accumulated
        
                     
Other
        
          
Paid-In
   
Treasury Stock
  
Comprehensive
  
Retained
     
  
Common Stock
   
Capital
   
At Cost
  
Loss
  
Earnings
   
Total
 
   
Shares
   
Amt.
   
 
   
Shares
   
Amt.
  
 
  
 
   
 
 
Balance May 2, 2021
   60,691,906   $607   $535,768    12,847,298   $(596,206 $(7,653 $246,126   $178,642 
Net income
   —      —      —      —      —     —     52,770    52,770 
Unrealized foreign currency translation loss
   —      —      —      —      —     (15  —      (15
Unrealized gain on derivatives, net of tax
   —      —      —      —      —     1,372   —      1,372 
Share-based compensation
   —      —      3,187    —      —     —     —      3,187 
Issuance of common stock
   584,567    6    1,393    —      —     —     —      1,399 
Repurchase of common stock
   —      —      —      172,800    (7,480  —     —      (7,480
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
Balance August 1, 2021
   61,276,473   $613   $540,348    13,020,098   $(603,686) $ (6,296)   $298,896   $229,875 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
   
Thirteen Weeks Ended August 2, 2020
 
                      
Accumulated
        
                     
Other
        
          
Paid-In
   
Treasury Stock
  
Comprehensive
   
Retained
    
  
Common Stock
   
Capital
   
At Cost
  
Loss
   
Earnings
  
Total
 
   
Shares
   
Amt.
   
 
   
Shares
   
Amt.
  
 
   
 
  
 
 
Balance May 3, 2020
   49,578,351   $496   $411,048    12,786,624   $(595,077)  $ (13,753)   $389,921  $192,635 
Net loss
   —      —      —      —      —     —      (58,602  (58,602
Unrealized foreign currency translation gain
   —      —      —      —      —     304    —     304 
Unrealized gain on derivatives, net of tax
   —      —      —      —      —     1,372    —     1,372 
Share-based compensation
   —      —      2,734    —      —     —      —     2,734 
Issuance of common stock
   10,843,861    108    112,471    —      —     —      —     112,579 
Repurchase of common stock
   —      —           40,676    (651  —      —     (651
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
  
 
 
 
Balance August 2, 2020
   60,422,212   $604   $526,253    12,827,300   $(595,728)  $(12,077)   $331,319  $250,371 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
  
 
 
 
See accompanying notes to consolidated financial statements.
6

DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands, except share amounts)
 
   
Twenty-Six
Weeks Ended August 1, 2021
 
                      
Accumulated
        
                     
Other
        
          
Paid-In
   
Treasury Stock
  
Comprehensive
  
Retained
     
  
Common Stock
   
Capital
   
At Cost
  
Loss
  
Earnings
   
Total
 
   
Shares
   
Amt.
   
 
   
Shares
   
Amt.
  
 
  
 
   
 
 
Balance January 31, 2021
   60,488,833   $605   $531,191    12,842,227   $(595,970) $(9,085)  $226,491   $153,232 
Net income
   —      —      —      —      —     —      72,405    72,405 
Unrealized foreign currency translation gain
   —      —      —      —      —     46    —      46 
Unrealized gain on derivatives, net of tax
   —      —      —      —      —     2,743    —      2,743 
Share-based compensation
   —      —      6,158    —      —     —      —      6,158 
Issuance of common stock
   787,640    8    2,999    —      —     —      —      3,007 
Repurchase of common stock
   —      —      —      177,871    (7,716  —      —      (7,716
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
Balance August 1, 2021
   61,276,473   $613   $540,348    13,020,098   $(603,686) $(6,296)  $298,896   $229,875 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
   
 
 
 
   
Thirteen Weeks Ended May 1, 2022
 
   
Common Stock
   
Paid-In

Capital
   
Treasury Stock
 
At Cost
  
Accumulated
Other
Comprehensive

Loss
  
Retained

Earnings
   
Total
 
   
Shares
   
Amt.
   
Shares
   
Amt.
 
Balance January 30, 2022
   61,563,613   $616   $548,776    13,073,678   $(605,435 $(3,628 $335,131   $275,460 
Net income
   —      —      —      —      —     —     66,984    66,984 
Unrealized foreign currency translation loss
   —      —      —      —      —     (42  —      (42
Unrealized gain on derivatives, net of tax
   —      —      —      —      —     1,371   —      1,371 
Share-based compensation
             3,555    —      —     —     —      3,555 
Issuance of common stock
   254,236    2    5,646    —      —     —     —      5,648 
Repurchase of common stock
   —      —      —      25,714    (1,234  —     —      (1,234
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
Balance May 1, 2022
   61,817,849   $618   $557,977    13,099,392   $(606,669 $(2,299 $402,115   $351,742 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
 
   
Twenty-Six
Weeks Ended August 2, 2020
 
                      
Accumulated
       
                     
Other
       
          
Paid-In
   
Treasury Stock
  
Comprehensive
  
Retained
    
  
Common Stock
   
Capital
   
At Cost
  
Loss
  
Earnings
  
Total
 
   
Shares
   
Amt.
   
 
   
Shares
   
Amt.
  
 
  
 
  
 
 
Balance February 2, 2020
   43,386,852   $434   $339,161    12,783,512   $(595,041)  $ (8,369)  $433,465  $169,650 
Net loss
   —      —      —      —      —     —     (102,146  (102,146
Unrealized foreign currency translation loss
   —      —      —      —      —     (131  —     (131
Unrealized loss on derivatives, net of tax
   —      —      —      —      —     (3,577  —     (3,577
Share-based compensation
   —      —      2,345    —      —     —     —     2,345 
Issuance of common stock
   17,035,360    170    184,747    —      —     —     —     184,917 
Repurchase of common stock
   —      —           43,788    (687  —     —     (687
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balance August 2, 2020
   60,422,212   $604   $526,253    12,827,300   $ (595,728) $ (12,077) $331,319  $250,371 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
   
Thirteen Weeks Ended May 2, 2021
 
   
Common Stock
   
Paid-In

Capital
   
Treasury Stock
 
At Cost
  
Accumulated
Other
Comprehensive
Loss
  
Retained
Earnings
   
Total
 
   
Shares
   
Amt.
   
Shares
   
Amt.
 
Balance January 31, 2021
   60,488,833   $605   $531,191    12,842,227   $(595,970 $(9,085 $226,491   $153,232 
Net income
   —      —      —      —      —     —     19,635    19,635 
Unrealized foreign currency translation gain
   —      —      —      —      —     61   —      61 
Unrealized gain on derivatives, net of tax
   —      —      —      —      —     1,371   —      1,371 
Share-based compensation
   —      —      2,971    —      —     —     —      2,971 
Issuance of common stock
   203,073    2    1,606    —      —     —     —      1,608 
Repurchase of common stock
   —      —           5,071    (236  —     —      (236
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
Balance May 2, 2021
   60,691,906   $607   $535,768    12,847,298   $(596,206 $(7,653 $246,126   $178,642 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
   
 
 
 
See accompanying notes to consolidated financial statements.
 
75

DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
  
Twenty-Six
 
Weeks
Ended
August 1, 2021
 
Twenty-Six Weeks

Ended

August 2, 2020
   
Thirteen Weeks
Ended

May 1, 2022
 
Thirteen Weeks
Ended

May 2, 2021
 
Cash flows from operating activities:
          
Net income (loss)
  $72,405  $ (102,146)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
     
Net income
  $66,984  $19,635 
Adjustments to reconcile net income to net cash provided by operating activities:
     
Depreciation and amortization expense
   69,974   70,512    33,288   35,099 
Non-cash
interest expense
   3,774   2,201    1,887   1,887 
Impairment of long-lived assets
   —     13,727 
Deferred taxes
   (4,723  (31,609   3,677   (4,840
Loss on disposal of fixed assets
   257   417    216   145 
Share-based compensation
   6,158   2,345    3,555   2,971 
Other, net
   2,127   173    993   950 
Changes in assets and liabilities:
          
Inventories
   (4  3,288    (1,282  995 
Prepaid expenses
   1,405   2,089    (5,087  197 
Income tax receivable
   18,425   (21,474   48,224   14,840 
Other current assets
   (800  2,311    (253  (341
Other assets and deferred charges
   (2,503  107    64   (2,097
Accounts payable
   (4,918  6,646    (10,882  1,173 
Accrued liabilities
   39,187   37,522    4,166   8,667 
Income taxes payable
   2,198   (2,430   3,101   845 
Other liabilities
   (4,874  2,817    (57  (2,930
  
 
  
 
   
 
  
 
 
Net cash provided
by (used in) operating activities
   198,088   (13,504
Net cash provided by operating activities
   148,594   77,196 
  
 
  
 
   
 
  
 
 
Cash flows from investing activities:
          
Capital expenditures
   (37,915  (63,486   (40,037  (10,359
Proceeds from sales of property and equipment
   446   152    200   54 
  
 
  
 
   
 
  
 
 
Net cash used in investing activities
   (37,469  (63,334   (39,837  (10,305
  
 
  
 
   
 
  
 
 
Cash flows from financing activities:
          
Proceeds from debt
   37,000   138,000    14,000   19,000 
Payments of debt
   (97,000  (38,500   (14,000)    (79,000
Net proceeds from the issuance of common stock
   —     182,207 
Proceeds from the exercise of stock options
   3,007   359    5,648   1,608 
Dividends paid
   —     (4,891
Repurchases of common stock to satisfy employee withholding tax obligations
   (7,716  (687   (1,234  (236
  
 
  
 
   
 
  
 
 
Net cash provided by (used in) financing activities
   (64,709  276,488    4,414   (58,628
  
 
  
 
   
 
  
 
 
Increase in cash and cash equivalents
   95,910   199,650    113,171   8,263 
Beginning cash and cash equivalents
   11,891   24,655    25,910   11,891 
  
 
  
 
   
 
  
 
 
Ending cash and cash equivalents
  $ 107,801  $224,305   $139,081  $20,154 
  
 
  
 
   
 
  
 
 
Supplemental disclosures of cash flow information:
          
Increase (decrease) in fixed asset accounts payable
  $2,745  $(12,466)
Increase in fixed asset accounts payable
  $2,917  $1,845 
Cash paid (refund received) for income taxes, net
  $(1,189) $752   $(35,129 $(8,525
Cash paid for interest, net
  $22,978  $11,295   $16,904  $22,525 
See accompanying notes to consolidated financial statements.
 
8
6

DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
Note 1: Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements include the accounts of Dave & Buster’s Entertainment, Inc. (referred to herein as the “Company”, “we,” “us” and “our”), any predecessor companies and its wholly-owned subsidiaries, Dave & Buster’s Holdings, Inc. (“D&B Holdings”), which owns 100%
of the outstanding common stock of Dave & Busters,Buster’s, Inc. (“D&B Inc”), the operating company. All intercompany
balances and transactions have been eliminated in consolidation.
The Company, headquartered in Dallas,Coppell, Texas, is a leading operator of high-volume entertainment and dining venues (“stores”) in North
 America for adults and families under the name “Dave & Buster’s”. The Company operates its business as 1 operating and 1 reportable segment. During the first and second quarters of fiscal 2021,thirteen weeks ended May 1, 2022, we opened 1 new store located in Gainesville, Florida and 1 new store located in Fairfield, California, respectively.
Sioux Falls, South Dakota. As of August
May 1, 2021,2022, we owned and operated 142145 stores located in 4041 states, Puerto Rico and 1 Canadian province.
The Company operates on a 52 or
53-week
fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period reported has 13 weeks. Fiscal 20212022 and 2020,2021, which end on January 30, 202229, 2023 and January 31, 2021,30, 2022, respectively, contain 52 weeks.
The Company’s financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Our quarterly financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended January 31, 2021,30, 2022, included in our Annual Report on Form
10-K
as filed with the SEC.
COVID-19
Considerations
— On March 11, 2020, the World Health Organization declared the
COVID-19
outbreak to be a global pandemic and on March 13, 2020, the United States declared a National Public Health Emergency. As a result, several state and local mandates were implemented that encouraged the practice of social distancing, placed restrictions from individuals gathering in groups and, in many areas, placed complete restrictions on
non-essential
movement outside of the home. Shortly after the national emergency declaration, state and local officials began placing restrictions on businesses, some of which allowed
To-Go
or curbside service only while others limited capacity in the dining room or midway. By March 20, 2020, all our 137
operating stores were temporarily closed. On April 30, 2020, our first store
re-opened
to the public, as state and local guidelines began to allow dining rooms and arcades to open at limited capacity and/or limited hours of operation. By the end of fiscal 2020, we had
re-opened
an additiona
l 101
stores with limited operations. The Company also opened five new stores in the second half of the fiscal year, all of which commenced construction prior to the outbreak of the
COVID-19
pandemic. As of January 31, 2021
, 107 of our 140 stores were open and operating in limited capacity.
During the first quarter of fiscal 2021, the Company
re-opened
31 additional stores and 1 new store opened on February 8, 2021. During the second quarter of fiscal 2021, the Company
re-opened
3 stores, including one that temporarily closed during the first quarter, and the Company opened 1 new store on June 1
5
, 2021, resulting in all our 142 stores open and operating in some capacity as of the end of our second quarter.
As stores were
re-opened
during fiscal 2020, typically in limited capacity, the Company reduced labor and other operating costs. During fiscal 2020, the Company also negotiated with landlords and other vendors to negotiate relief from cash payments under existing lease and trade payable obligations, extending or reducing payment terms with several vendors. Regarding negotiations with landlords, a total of 126 initial rent relief agreements related to our operating locations and corporate headquarters were executed during fiscal 2020, which generally provided for rent deferrals on all or a portion of rent for up to six months. As the
COVID-19
pandemic continued to impact our business into the fourth quarter, the Company renewed negotiations with the majority of these landlords in order to provide additional rent relief, generally seeking to push out or extend the terms of deferral pay back periods and/or provide rent relief beyond the periods in the initial agreements. As of the end of the second quarter of fiscal 2021, the Company had executed 97 of these additional rent relief agreements.
In addition to reducing or deferring expenditures, including capital expenditures and discretionary spending, during the first half of fiscal 2020, the Company obtained additional liquidity through the sale of common stock, which resulted in net proceeds of $182,207. On October 27, 2020, D&B Inc completed the private sale of $550,000 in aggregate principal amount of 7.625% senior secured notes due 2025. At the same time, the revolving credit commitments under our existing credit facility were extended through August 17, 2024, and the suspension of our financial ratio covenants was extended until the last day of the first quarter of fiscal year 2022. See Note 3, Debt, for more information on these transactions.
9
The measures taken by the Company as well as the
re-opening
of the Company’s stores provide sufficient liquidity to meet estimated cash flow needs and covenant compliance obligations for at least the next twelve months from the issuance of the financial statements. We cannot predict whether, when or the manner in which the conditions surrounding
COVID-19,
particularly as a result of a new Delta variant of
COVID-19,
will change, including possible capacity restrictions or
re-closures
of our currently open stores and customer engagement with our brand.
The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities at the date of the consolidated financial statements and for the period then ended. Actual results could differ from those estimates. Operating results for the
twenty-six
thirteen weeks ended AugustMay 1, 20212022 are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending January 30, 2022.29, 2023.
Cash and cash equivalents
— We consider transaction settlements in process from credit card companies and all highly-liquid investments with original maturities of three months or less to be cash equivalents. Our cash management system provides for the daily funding of all major bank disbursement accounts as checks are presented for payment. Under this system, outstanding checks in excess of the cash balances at certain banks creates book overdrafts. A book overdraft of $8,168$16,673 is presented in “Accounts payable” in the Consolidated Balance Sheets as of January 31, 2021.30, 2022. There was no0 book overdraft as of AugustMay 1, 2021.2022. Changes in the book overdraft position are presented within “Net cash provided by (used in) operating activities” within the Consolidated Statements of Cash Flows.
Fair value of financial instruments
— Fair value is defined as the price that would be received to
sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. In determining fair value, the accounting standards establish a three-level hierarchy for inputs used in measuring fair value as follows: Level One inputs are quoted prices available for identical assets or liabilities in active markets; Level Two inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; and Level Three inputs are unobservable and reflect management’s own assumptions.
The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, and other current liabilities approximate fair value because of their short-term nature. The fair value of the Company’s interest rate swap is determined based upon Level Two inputs which includes valuation models as reported by our counterparties and third-party valuation specialists. These valuation models are based on the present value of expected cash flows using forward rate curves. The fair value of borrowings under our revolving credit facility was
 $62,114
at January 31, 2021, and the fair value of our senior secured notes was
 $588,232 $455,387 and $576,033
at August$456,204 as of May 1, 20212022 and January 31, 2021,30, 2022, respectively. The fair value of the Company’s debt is determined based on a discounted cash flow method, using a sector-specific yield curve based on market-derived, trade price data as of the measurement date, and is classified as a Level Two input within the fair value hierarchy.
The Company also measures certain
non-financial
assets (primarily property and equipment,
right-of-use
(“ROU”) assets, goodwill, tradenames, and other assets) at fair value on a
non-recurring
basis in connection with its periodic evaluations of such assets for potential impairment.
During the thirteen and
twenty-six
weeks ended August 2, 2020, the Company recorded an impairment charge for its long-lived assets, including ROU assets,first quarter of $0 and $6,746, respectively, primarily driven by the expected impact of the
COVID-19
pandemic on future cash flows of specific stores. During the
twenty-six
weeks ended August 1, 2021, the Company did not identify triggering events which would require a change in management’s estimate regarding the recoverability of store asset values, andfiscal 2022, there were 0 impairment related to our operating stores wasimpairments recognized. The Company has determined no events and circumstances existed during the
twenty-six
weeks ended August 1, 2021 that would indicate it is more likely than not that its goodwill or tradename are impaired. The ultimate severity and longevity of the
COVID-19
pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material.
During the thirteen and twenty-six weeks ended August 2, 2020, the Company recorded an impairment loss and related contract termination costs
of
$2,178 and $6,981
related to projects in development and discussions to terminate several executed lease contracts that had not yet commenced, which is included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income (Loss). There were no impairment charges related to our potential future sites during the twenty-six weeks ended August 1, 2021.
 
107

Interest rate
swaps
Effective February 28, 2019, the Company entered into three interest rate swap agreements to manage our exposure to interest rate movements on our variable rate credit facility. The agreements entitle the Company to receive at specified intervals, a variable rate of interest based on
one-month
LIBOR in exchange for the payment of a fixed rate of interest throughout the life of the agreements. The notional amount of the swap agreements, which mature August 17, 2022, totals
 $350,000
and the fixed rate of interest for all agreements is 2.47%
 2.47
%. Effective 
The Company initially designated its interest rate swap agreements as a cash flow hedge and accounted for the underlying activity in accordance with hedge accounting. Effective April 14, 2020, the Company amended its existing credit facility agreement to obtain relief from its financial covenants, and as a result, the variable interest rate terms were modified to create an interest rate floor of 1.00%. Accordingly, and as a result of the then current forward interest rate curve, the Company discontinued the hedging relationship as of April 14, 2020
(de-designation
(de-designation date). Given the continued existence of the hedged interest payments, the Company is r
e
classifyingreclassifying its accumulated other comprehensive loss of $17,609
$17,609 as of the
de-designation
date into “Interest expense, net” using a straight-line approach over the remaining life of the originally designated hedging relationship. The amount of
pre-tax
losses in accumulated other comprehensive loss that was reclassified into interest expense was $3,774 and $2,201 for the
twenty-six
weeks ended August 1, 2021 and August 2, 2020, respectively,relationship, and the Company expects to reclassify $7,547 within the next twelve months.unamortized balance of $2,201
as of May 1, 2022 will be fully amortized at maturity. Effective with the
de-designation,
any gain or loss on the derivatives are recognized in earnings in the period in which the change occurs. For the
twenty-six
thirteen weeks ended AugustMay 1, 2022 and May 2, 2021, a gain of
 $701 and August 2, 2020, a loss of $88 and $1,796,$131, respectively, were recognized, which are included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income (Loss).Income.
Prior to
The fair value of outstanding interest rate swap derivatives liability was $1,172 and $3,823 as of May 1, 2022 and January 30, 2022, respectively, and the
de-designation,
changes balance is included in “Accrued liabilities” in the fair values of the interest rate swaps were recorded as a component of other comprehensive loss until the interest payments being hedged were recorded as interest expense, at which time the amounts in accumulated other comprehensive loss were reclassified as an adjustment to interest expense. Cash flows related to the interest rate swaps were included as a component of interest expense and in operating activities.
Credit risk related to
the failure of our counterparties to perform under the terms of the swap agreements is minimized by entering into transactions with carefully selected, credit-worthy parties and the fact that the swap contracts are distributed among several financial institutions to reduce the concentration of credit risk. Our swap agreements with our derivative counterparties contain a provision where if the Company defaults on any of its indebtedness, and repayment of the indebtedness has been accelerated, the Company could also be declared in default on its derivative obligations.Consolidated Balance Sheets.
The following derivative instruments were outstanding as of the end of the periods indicated:
       
Fair Value
 
   
Balance Sheet Location
   
August 1, 2021
   
January 31, 2021
 
Interest rate swaps
   Accrued liabilities   $(8,300  $(8,350
Interest rate swaps
   Other liabilities    (373   (4,416
        
 
 
   
 
 
 
Total derivatives
       $(8,673  $(12,766
        
 
 
   
 
 
 
The following table summarizes the activity in accumulated other comprehensive loss related to our derivative instruments:
 
   
Thirteen weeks ended
   
Twenty-six weeks ended
 
   
August 1, 2021
   
August 2, 2020
   
August 1, 2021
   
August 2, 2020
 
Loss recorded in accumulated other comprehensive income
  $0     $0     $
 
 
   $7,602 
Loss reclassified into income (1)
  $(1,887)  $(1,887  $(3,774)  $(2,680
Income tax expense (benefit) in accumulated other
                
comprehensive income
  $515   $515   $1,031   $(1,345
(1)
Amounts reclassified into income are included in “Interest expense, net” in the Consolidated Statements of Comprehensive Income (Loss).
   
Thirteen weeks ended
 
   
May 1, 2022
   
May 2, 2021
 
Loss reclassified or amortized into interest expense
  $1,887   $1,887 
Income tax effect
  $(516  $(516
Revenue recognition
Amusement revenues are primarily recognized upon utilization of game play credits on power cards purchased and used by customers to activate video and redemption games. Redemption games allow customers to earn tickets, which may be redeemed for prizes in our WIN! area. We have deferred a portion of amusement revenues for the estimated unfulfilled performance obligations based on an estimated rate of future use by customers of unused game play credits and the material right provided to customers to redeem tickets in the future for prizes. During the thirteen and twenty-six weeks ended AugustMay 1, 2021,2022, we recognized revenue of approximately
$12,900 and $24,800,
respectively,$19,100 related to the amount in deferred amusement revenue as of the end of fiscal 2020.2021.
11

In jurisdictions where we do not have a legal obligation to remit unredeemed gift card balances to a legal authority, we recognize revenue on unredeemed gift cards in proportion to the pattern of redemption by the customers. During the thirteen and twenty-six weeks ended AugustMay 1, 2021,2022, we recognized revenue of approximately
 $900 and $1,800,
respectively, $2,100 related to the amount in deferred gift card revenue as of the end of fiscal 2020,2021, of which approximately
 $120 and $240
, respectively, $290 was breakage revenue.
Stockholders’ equity
— In our consolidated financial statements, the Company treats shares withheld for tax purposes on behalf of our employees in connection with the vesting of time-based and performance restricted stock units as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. During the
twenty-six
thirteen weeks ended AugustMay 1, 2022 and May 2, 2021, and August 2, 2020,respectively, we withheld
177,871 25,714 and 43,7885,071 shares of common stock to satisfy $7,716$1,234 and $687$236 of employees’ tax obligations, respectively. The share activity in the
twenty-six
weeks ended August 2, 2020 includes the settlements of $2,351 cash obligations through the issuance of 150,455 shares of common stock.
On April 14, 2020, pursuant to an open market sale agreement, the Company sold 6,149,936 shares of its common stock at a price of $12.20 per share, for proceeds of $75,000, prior to deducting offering expenses related to the offering. During May 2020, the Company entered into an underwriting agreement, pursuant to which it sold an additional 10,593,416 shares of its common stock (including shares under an over-allotment option) at a price of $10.44 per share, for proceeds of $110,600, prior to deducting offering costs.
Effective March 18, 2020, the Board of Directors of the Company adopted a
364-day
duration Shareholder Rights Plan (the “Rights Plan”) and declared a dividend of one preferred share purchase right for each outstanding share of common stock to shareholders of record on March 30, 2020 to purchase from the Company one
one-ten
thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company for an exercise price of $45.00, once the rights become exercisable, subject to adjustment as provided in the related rights agreement. The Rights Plan expired on March 17, 2021.
Earnings per share
— Basic net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the
basic
weighted average number of common shares outstanding for the reporting period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted net income (loss) per share, the basic weighted average shares outstanding is increased by the dilutive effect of stock options and restricted share awards. Stock options and restricted share awards with an anti-dilutive effect are not included in the diluted net income (loss) per share calculation. For the thirteen weeks ended AugustMay 1, 20212022 and AugustMay 2, 2020,2021, the Company excluded anti-dilutive awards from the calculation of approximately 164,811approximatel
y 102,896 and 2,419,468, 111,485,
respectively. For the
twenty-six
weeks ended August 1, 2021 and August 2, 2020, the Company excluded anti-dilutive awards from the calculation of approximately 134,177 and 1,456,430, respectively. Basic weighted average shares outstanding are reconciled to diluted weighted average shares outstanding as follows
:
follows:
   
Thirteen weeks ended
   
Twenty-Six
weeks ended
 
   
August 1, 2021
   
August 2, 2020
   
August 1, 2021
   
August 2, 2020
 
Basic weighted average shares outstanding
   48,178,611    47,111,763    47,937,158    39,470,874 
Weighted average dilutive impact of awards (1)
   1,051,206    0      1,335,535    0   
Diluted weighted average shares outstanding
   49,229,817    47,111,763    49,272,693    39,470,874 

(1)
Amounts exclude all potential common and common equivalent shares for periods when there is a net loss.
Recently adopted accounting guidance
— In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
, which removes certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for taxable goodwill. The Company adopted this standard as of the beginning of fiscal year 2021, and the adoption did not have a material impact on our consolidated financial statements.
Recent accounting pronouncements
— In March 2020, the FASB issued
ASU
2020-04,
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Reform on Financial Reporting
, which provides temporary optional expedients and exceptions to the current guidance for contract modifications and hedging relationships through December 31, 2022, that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. A contract modification resulting from reference rate reform may be accounted for as a continuation of the existing contract rather than the creation of a new contract. Additionally, changes in the critical terms of hedging relationships, caused by reference rate reform, should not result in the
de-designation
of the instrument, provided certain criteria are met. Although the Company has swap agreements based on LIBOR rates, the guidance is not expected to have an impact on our consolidated financial statements due to the
de-designation
of our hedging relationships in fiscal 2020.8
12

Table of Contents
   
Thirteen weeks ended
 
   
May 1, 2022
   
May 2, 2021
 
Basic weighted average shares outstanding
   48,580,273    47,695,705 
Weighted average dilutive impact of awards
   873,230    1,635,387 
Diluted weighted average shares outstanding
   49,453,503    49,331,092 
Note 2: Accrued Liabilities
Accrued liabilities consist of the following as of the end of each period:
 
  
August 1, 2021
   
January 31, 2021
   
May 1, 2022
   
January 30, 2022
 
Deferred amusement revenue
  $95,380   $78,852   $99,883   $92,961 
Current portion of operating lease liabilities, net (1)
   49,699    46,471    52,780    45,445 
Compensation and benefits
   33,325    13,846    30,357    27,447 
Current portion of deferred occupancy costs
   23,223    36,121    14,248    19,164 
Accrued interest
   10,748    11,321 
Deferred gift card revenue
   10,317    10,918    10,840    11,855 
Property taxes
   10,154    8,149    7,143    6,450 
Current portion of derivatives
   8,300    8,350 
Sales and use taxes
   6,148    1,385 
Utilities
   5,638    4,151 
Current portion of long-term insurance
   5,000    5,100    5,700    5,700 
Customer deposits
   2,695    1,373    5,592    3,471 
Utilities
   5,582    5,262 
Sales and use taxes
   5,574    4,465 
Current portion of derivatives
   1,172    3,823 
Accrued interest
   246    8,629 
Other
   11,435    8,753    15,803    13,821 
  
 
   
 
   
 
   
 
 
Total accrued liabilities
  $272,062   $234,790 
Total accrued liabilities
  $ 254,920   $ 248,493 
  
 
   
 
   
 
   
 
 
(1)
The balance of leasehold incentive receivables of $4,668$3,419 and $8,763
$10,064 as of AugustMay 1, 20212022 and January 31, 2021,30, 2022, respectively, is reflected as a reduction of the current portion of operating lease liabilities.liabilities
.
Note 3: Debt
Long-term debt consists of the following:
 
  
August 1, 2021
   
January 31, 2021
   
May 1, 2022
   
January 30, 2022
 
Senior secured notes
  $550,000   $550,000   $ 440,000   $ 440,000 
Credit facility
revolver
   0      60,000 
  
 
   
 
   
 
   
 
 
Total debt outstanding
   550,000    610,000    440,000    440,000 
Less debt issuance costs
   (12,184   (13,612   (8,034   (8,605
  
 
   
 
   
 
   
 
 
Long-term debt, net
  $537,816   $596,388   $431,966   $431,395 
  
 
   
 
   
 
   
 
 
On October 27, 2020, the Company issued
$550,000
$550,000 aggregate principal amount of
7.625
% 7.625% senior secured notes (the “Notes”). Interest on the Notes accrues from October 27, 2020 and is payable in arrears on
November 1 and May 1 of each year
, commencing on May 1, 2021.year. The Notes mature on
November 1, 2025,
, unless earlier redeemed, and are subject to the terms and conditions set forth in the related indenture. Prior to November 1, 2022, but not more than once during any twelve-month period commencing with the issue date of the Notes, the Company may redeem up to 10% of the original principal amount of the Notes at a redemption price of 103% of the principal amount, plus accrued and unpaid interest, at the redemption date. After November 1, 2022, the Company may redeem the Notes, in whole or in part, at certain specified redemption prices, plus accrued and unpaid interest, at the redemption date. The Notes were issued by D&B Inc and are unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries, which is substantially the same as the guarantors of the Company’s existing credit facility. During fiscal 2021, the Company redeemed a total of
 $110,000
outstanding principal amount of the Notes in two separate transactions, and paid prepayment premiums of
 $3,300
, plus accrued and unpaid interest to the date of redemptions. The early redemptions of the Notes resulted in a loss on extinguishment of approximately
 $2,300
related to a proportional amount of unamortized issuance costs. Beginning October 27, 2022, the Company may elect to further redeem the Notes, in whole or in part, at certain specified redemption prices, plus accrued and unpaid interest, at the redemption date. 

The interest rates per annum applicable to loans under our existing credit facility are based on a defined LIBOR rate plus an applicable margin, based on a total leverage ratio, as defined. The first amendment to the existing credit facility, effective April 14, 2020, increased the interest rate spread on variable rate debt to 2.00% and set a LIBOR floor of 1.00%. Concurrent and subject to the issuance of the Notes, the Company entered into a second amendment to its existing credit facility, which included relief from testing compliance with certain financial covenants until the last day of the fiscal quarter ending on May 1, 2022. During the financial covenant suspension period the Company is required to maintain minimum liquidity (primarily availability under the credit facility) of
$150,000
. The second amendment extended the maturity date of the
$500,000
$500,000 revolving portion of the facility from August 17, 2022, to August 17, 2024, and during the financial covenant suspension increased pricing period, increased the interest rate spread to
4.00
% during the financial covenant suspension period, 4.00% and instituted a
 1.00
% 1.00% utilization fee during that same time period. The utilization fee is due at maturity. The financial covenant suspension period mayfee. Shortly after the end earlier, atof the Company’s election, if certain predetermined financial covenant ratios are achieved. After the financial covenant suspension period,first quarter of fiscal 2022, the interest rate spread rangeswill range from
1.25% to 3.00%. The
second and the utilization fee, which is due at maturity, will cease. At the end of the first quarter of fiscal 2022, we had letters of credit outstanding of $7,505 and an unused commitment balance of $492,495 under the revolving credit facility.

139
amendment terminated the term loan portion
Amortization of the credit facility, which triggered payment of $1,900 of lender debt issuance costs associated with the first amendment. The first amendment, effective April 14, 2020, provided initial relief from compliance with financial covenants after the
COVID-19
pandemic and increased the interest rate spread on variable rate debt to 2.00% plus a LIBOR floor of 1.00%.
The Company used
the proceedsissuance of the Notes offering, along with cash on hand, to repay the $255,000 principal balance of the term loan facility, $463,000
of borrowings under the revolvingand credit facility was
 $
960
and related accrued interest.    The Company incurred$
1,102
for the first quarter of fiscal 2022 and fiscal 2021, respectively, and is included in “Interest expense, net” in the Consolidated Statements of Comprehensive Income. For the thirteen weeks ended May 1, 2022, and May 2, 2021, respectively, the Company’s weighted average effective interest rate on our total debt costs of
facilities (before capitalized interest amounts) wa
$18,300, which are being amortized over the terms of the respective Notess
10.90
% and revolving credit facility. The Company also recorded a loss of $904 related to the unamortized debt costs associated with the term portion of the credit facility.
10.15
%, respectively.
Our credit facility and Notes contain restrictive covenants that, among other things, place certain limitations on our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, pay dividends, acquire other businesses or sell assets.
For the
twenty-six
weeks ended August 1, 2021 and August 2, 2020, respectively, the Company’s weighted average interest rate on outstanding borrowings was 10.17% and 3.98%, respectively. As of August 1, 2021, we had lettersthe end of the first quarter of fiscal 2022, the Company was in compliance with the financial covenants of our credit outstandingfacility and all the restrictive covenants of $10,486the Notes and an unused commitment balance of $489,514 under the revolving credit facility.
Interest expense, net
— The following table sets forth our recorded interest expense, net:
   
Thirteen Weeks Ended
   
Twenty-
S
ix Weeks Ended
 
  
August 1, 2021
   
August 2, 2020
   
August 1, 2021
   
August 2, 2020
 
Interest expense on debt
  $11,038   $5,865   $23,139   $11,163 
Interest associated with swap agreements
   1,887    1,887    3,774    2,680 
Amortization of issuance cost
   1,103    411    2,205    654 
Interest income
   0       0      0       (22
Capitalized interest
   (300   0      (570   (197
   
 
 
   
 
 
   
 
 
   
 
 
 
Total interest expense, net
  $13,728   $8,163   $28,548   $14,278 
   
 
 
   
 
 
   
 
 
   
 
 
 
Note 4: Leases
We currently lease most of the buildings or sites for our stores, corporate office,store support center, and warehouse space under facility operating leases. These leases typically have initial terms ranging from ten to twenty years and include one or more options to renew. When determining the lease term, we include option periods for which renewal is reasonably certain. Most of the leases require us to pay property taxes, insurance, and maintenance of the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Operating leases also includes certain equipment leases that have a term in excess of one year. Certain facility leases also have provisions for additional contingent rentals based on revenues.
Operating lease cost, variable lease cost and short-term lease cost related primarily to our facilities is included in “Other store operating expenses” for our operating stores,
“Pre-opening
costs” for our stores not yet operating, or “General and administrative expenses” for our corporate office and warehouse, in the Consolidated Statements of Comprehensive Income (Loss).Income.
The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and property taxes, are as follows for the fiscal year ended:
 
  
Thirteen Weeks Ended
   
Twenty-Six
Weeks Ended
   
Thirteen Weeks Ended
 
August 1, 2021
   
August 2, 2020
   
August 1, 2021
   
August 2, 2020
 
May 1, 2022
   
May 2, 2021
 
Operating lease cost
  $33,297    33,321   $66,591    66,884   $ 34,782    33,294 
Variable lease cost
   7,241    5,688    14,630    13,054    9,847    7,389 
Short-term lease cost
   187    140    310    227    117    123 
  
 
   
 
   
 
   
 
   
 
   
 
 
Total
  $40,725   $39,149   $81,531   $80,165   $44,746   $40,806 
  
 
   
 
   
 
   
 
   
 
   
 
 
During fiscal 2020 and the first half of fiscal 2021, the Company entered into 126 initial rent relief agreements with our respective landlords on operating locations and our corporate headquarters. Under these agreements, certain rent payments will be abated, deferred or modified without penalty for various periods, generally providing for full deferral for three months beginning April 2020, with partial deferrals continuing for periods of up to six months at approximately 50% of those locations. As the
COVID-19
pandemic continued to impact
14

our business into the fourth quarter of fiscal 2020, the Company renewed negotiations with the majority of these landlords in order to provide additional rent relief, generally seeking to push out or extend the terms of deferral pay back periods and/or provide rent relief beyond the periods in the initial agreements. As of the end of the second quarter of fiscal 2021, the Company had executed 97 rent relief agreements related to the second phase of negotiation.landlords. The Company has elected to apply thean available practical expedient to account for lease concessions and deferrals resulting directly from
the COVID-19
pandemic as though the enforceable rights and obligations to the deferrals existed in the respective contracts at lease inception and will not account for the concessions as lease modifications unless the concession results in a substantial increase in the Company’s obligations. To date, 206A total of 208 of our 223225 rent relief agreements qualified for this accounting election, and the remaining agreements were treated as lease modifications, primarily due to a significant extension of the lease term. The Company has bifurcated our current op
e
ratingoperating lease liabilities into the portion that remains subject to accretion and the portion that is accounted for as a deferral of payments or as short payments. The current portion of deferred occupancy costs or short pays is included in “Accrued liabilities” and the balance, or
or $17,286 $6,353 and $16,243 at August$8,434 as of May 1, 20212022 and January 31, 2021,30, 2022, respectively, is included in “Other liabilities” in the Consolidated Balance Sheets.
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,
slip-and-fall
and other customer-related incidents and similar matters. In the opinion of management, based upon consultation with legal counsel, the amount of ultimate liability, with respect to such legal proceedings and claims will not materially affect the consolidated results of our operations or our financial condition. Legal costs related to such claims are expensed as incurred.
The Company is a defendant in several lawsuits filed in courts in California alleging violations of California Business and Professions Code, industry wage orders,
wage-and-hour
laws and rules and regulations pertaining primarily to the failure to pay proper regular and overtime wages, failure to pay for missed meals and rest periods, pay stub violations, failure to pay all wages due at the time of termination and other employment related claims (the “California Cases”). Some of the California Cases purport or may be b
e
10

determined to be class actions or Private Attorneys General Act representative actions and seek substantial damages and penalties. During fiscal 2020, the Company settled a portion of the cases at the approximate amount estimated and accrued. For the remaining cases, the Company’s assessments are based on assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions. Management’s assessment of these California Cases, as well as other lawsuits, could change because of future determinations or the discovery of facts that are not presently known. Accordingly, the ultimate costs of resolving these cases may be substantially higher or lower than estimated. The Company continues to aggressively defend
the
remaining
cases.​​​​​​​
Note 6: Share-Based Compensation
Compensation expense related to stock options and restricted stock units is included in “General and administrative expenses” in the Consolidated Statements of Comprehensive Income (Loss) and is as follows:
 
   
Thirteen Weeks Ended
   
Twenty-Six
Weeks Ended
 
  
August 1, 2021
   
August 2, 2020
   
August 1, 2021
   
August 2, 2020
 
Stock options
  $84    290   $358    830 
Restricted stock units
   3,103    2,444    5,800    1,515 
   
 
 
   
 
 
   
 
 
   
 
 
 
Share-based compensation expense
  $3,187   $2,734   $6,158   $2,345 
   
 
 
   
 
 
   
 
 
   
 
 
 
15

   
Thirteen Weeks Ended
 
  
May 1, 2022
   
May 2, 2021
 
Stock options
  $261    274 
Restricted stock units
   3,294    2,697 
   
 
 
   
 
 
 
Share-based compensation expense
  $ 3,555   $ 2,971 
   
 
 
   
 
 
 
Transactions related to stock option awards during the
twenty-six
thirteen weeks ended AugustMay 1, 20212022 were as follows:
 
  
2014 Stock Incentive Plan
   
2010 Stock Incentive Plan
  
2014 Stock Incentive Plan
 
2010 Stock Incentive Plan
 
  
Number

of Options
   
Wtd. Avg.

Exercise Price
   
Number

of Options
   
Wtd. Avg.

Exercise Price
  
Number
 
Wtd. Avg.
 
 Number
 
 
Wtd. Avg.
 
 
 
 
of Options
 
 
 Exercise Price
 
 of Options
 
 
 
 
Exercise Price
 
 
Outstanding at January 31, 2021
   1,231,601   $36.77    173,563   $7.51 
Outstanding at January 30, 2022
   933,379   $ 42.50    73,554   $ 8.33 
Granted
   —      —      —      —      36,844    47.71    —      —   
Exercised
   (151,902   16.61    (70,122   6.90    (160,091   34.95    (6,059   8.69 
Forfeited
   (9,838   44.53    —      —      (7,855   58.42    —      —   
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Outstanding at August 1, 2021
   1,069,861   $39.57    103,441   $7.91 
Outstanding at May 1, 2022
   802,277   $44.08    67,495   $8.30 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
Exercisable at August 1, 2021
   1,005,392   $38.76    103,441   $7.91 
Exercisable at May 1, 2022
   765,433   $43.91    67,495   $8.30 
  
 
   
 
   
 
   
 
   
 
   
 
   
 
   
 
 
The total intrinsic value of options exercised during the
twenty-six
thirteen weeks ended AugustMay 1, 20212022 was $6,718.$2,287. The unrecognized expense related to our stock option plan totaled approximately $214$954 as of AugustMay 1, 20212022 and will be expensed over a weighted average period of 0.73.0 years.
Transactions related to restricted stock units during the
twenty-six
thirteen weeks ended AugustMay 1, 2021,2022, were as follows:
 
  
 
  
 
Wtd. Avg.
 
 
   
Shares
   
Fair Value
 
Outstanding at January 30, 2022
   922,799   $ 24.88 
Granted
   485,522    47.17 
Performance adjusted units
   11,808    46.75 
Vested
   (88,086   47.46 
Forfeited
   (41,212   51.66 
   
 
 
   
 
 
 
Outstanding at May 1, 2022
   1,290,831   $31.07 
   
 
 
   
 
 
 
   
Shares
   
Wtd. Avg.

Fair Value
 
 
Outstanding at January 31, 2021
   1,116,341   $17.32 
Granted
   226,153    50.60 
Performance adjusted units
   362,491    15.30 
Vested
   (565,616   15.11 
Forfeited
   (49,615   37.64 
   
 
 
   
 
 
 
Outstanding at August 1, 2021
   1,089,754   $23.78 
   
 
 
   
 
 
 

Fair value of our time-based and performance-based restricted stock units is based on our closing stock price on the date of grant. 
The grant date
fair value of market stock unitsoptions was determined using a Monte-Carlo simulationthe Black-Scholes option valuation model. The unrecognized expense related to restricted stock units was $12,523$27,575 as of AugustMay 1, 20212022 and will be expensed over a weighted average period of 2.13.2 years.
During the
twenty-six
thirteen weeks ended AugustMay 1, 20212022 and AugustMay 2, 2020,2021, excess tax expense (benefit) of $(5,665)$(63) and $477, $(1,135),
respectively, were recognized in the “Provision (benefit) for income taxes” in the Consolidated Statement of Comprehensive Income (Loss) and classified as a source in operating activities in the Consolidated Statement of Cash Flows.

1611

Note 7: Income Taxes
The effective tax rate for the thirteen weeks ended May 1, 2022, was 23.3%, compared to 11.5% for the thirteen weeks ended May 2, 2021. The previous quarter tax provision includes higher excess tax benefits associated with share-based compensation and credits associated with the reversal of certain tax valuation allowances.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. Intended to provide economic relief to those impacted by the
COVID-19
pandemic, the CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in fiscal 2018, 2019 and 2020 and technical amendments regarding the expensing of qualified improvement property. The application of the technical amendments made by the CARES Act to qualified improvement property resulted in additional tax net operating losses which were carried back from fiscal 2020 and fiscal 2019 to years with a higher federal corporate income tax rate. During the second quarter of fiscal 2021, the Company filed the fiscal 2020 carryback claims for federal tax refunds of approximately
$57,400
. While we expect to receive a portion $57,400, of which approximately $33,200 were received during the refunds in fiscal 2021, due to government delays in processing these claims, we do not expect to receive the majority untilfirst quarter of fiscal 2022.
The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annualized effective tax rate for the full fiscal year to “ordinary” income or loss for the reporting period. Due to the uncertainty created by the events surrounding the
COVID-19
pandemic, the actual effective tax rate for the
year-to-date
period was used to calculate the income tax provision (benefit) for the
twenty-six
weeks ended August 2, 2020. The effective tax rate for the
twenty-six
weeks ended August 1, 2021, wa
s 17.4
%, compared to a benefit o
f 34.9
% for the
twenty-six
weeks ended August 2, 2020. The current year tax provision includes higher excess tax benefits associated with share-based compensation while the prior year tax provision was a tax benefit primarily due to the impact of the
pre-tax
loss and the impact of the tax provisions within the CARES Act.
Note 8: Subsequent EventAcquisition
Subsequent
On April 6, 2022, the Company announced its entry into an Agreement and Plan of Merger, pursuant to which the Company has agreed to acquire 
100%
of the equity interests of Ardent Leisure Holding US, Inc. (“Ardent US”), doing business as “Main Event”, in exchange for cash consideration of
 $835 
million (to be adjusted for cash on hand, Ardent US transaction expenses, payments pursuant to Ardent US’s long term incentive plan, certain capital expenditures, and certain agreed upon working capital adjustments) less the indebtedness of Ardent US immediately prior to the end of our second quarter, the Company notified the trusteeclosing of the Notes that it intendstransaction.
As of May 1, 2022, Ardent US owns and operates 
48
family entertainment centers under the name “Main Event” and
 3
family entertainment centers under the name “The Summit.” All
of
the centers are located in the United States. 
The closing of the transaction is subject to redeem $55,000 outstanding principalcustomary closing conditions, including approval by the shareholders of Ardent Leisure Group, and the transaction is expected to close in the second quarter. We expect the full amount of the Notes. The redemption is expected to take place prior to the end of the Company’s third quarter, which ends on October 31, 2021. In connection with the early redemption of the Notes, the Companycash consideration paid will paybe funded by a prepayment premium of $1,650, plus accrued and unpaid interest to the date of redemption, pursuant to the terms of the indenture governing the Notes. Additionally, the early redemption of the Notes will result in an additional loss on extinguishment of approximately $1,200 related to a proportionate amount of unamortized issuance costs.new term loan facility.
 
1712 

Item 2.
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the accompanying unaudited consolidated financial statements and the related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form
10-K
as filed with the Securities and Exchange Commission (“SEC”) on March 31, 2021.29, 2022. Unless otherwise specified, the meanings of all defined terms in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are consistent with the meanings of such terms as defined in the Notes to Unaudited Consolidated Financial Statements. This discussion contains statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not a guarantee of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this quarterly report as a result of various factors, including those set forth in the section entitled “Risk Factors” in our Annual Report on Form
10-K
filed with the SEC on March 31, 2021.29, 2022. 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,
thosesuch results or developments may not be indicative of results or developments in subsequent periods.
Recent DevelopmentsFinancial Highlights
On March 11, 2020, the World Health Organization declared the
COVID-19
outbreak to be a global pandemic and on March 13, 2020, the United States declared a National Public Health Emergency. As a result, several state and local mandates were implemented that encouraged the practice of social distancing, placed restrictions from individuals gathering in groups and, in many areas, placed complete restrictions on
non-essential
movement outside of the home. Shortly after the national emergency declaration, state and local officials began placing restrictions on businesses, some of which allowed
To-Go
or curbside service only while others limited capacity
Revenues totaled $451,101 in the dining room or midway. By March 20, 2020, all our 137 operating stores were temporarily closed. On April 30, 2020, our first store
re-opened
to the public, as state and local guidelines began to allow dining rooms and arcades to open at limited capacity and/or limited hoursquarter of operation. By the end of fiscal 2020, we had progressively
re-opened
an additional 101 stores2022 compared with limited operations. The Company also opened five new stores$363,582 in the second halffirst quarter of the fiscal year, all2019. A total of which commenced construction prior to the outbreak of the
COVID-19
pandemic. As of the end of fiscal 2020, 107 of our 140145 and 127 stores were open and operating in limited capacity. Bywithout restrictions at the end of the first quarter of fiscal 2021, only 3 stores remained closed, including one that temporarily
re-closed
due to a local increase2022 and 2019, respectively. Revenues totaled $265,340 in
COVID-19
cases. By the end of the secondfirst quarter of fiscal 2021, all our 142which ended with 138 of 141 stores were open and operating including two newin limited capacity.
Overall comparable store sales increased 10.9% compared with the same period in 2019 and increased 71.1% compared with the same period in 2021, which ended with 110 of 113 comparable stores that opened duringopen and operating in limited capacity.
Net income totaled $66,984, or $1.35 per diluted share, compared with net income of $42,443, or $1.13 per diluted share in the same period of 2019. In the same period of 2021, we recorded net income of $19,635.
Adjusted EBITDA totaled $143,247, or 31.8% of revenues, compared with Adjusted EBITDA of $98,184 or 27.0% of revenues in the first quarter of 2019. The increase over fiscal 2021.
The Company continues to be subject to risks and uncertainties2019 in Adjusted EBITDA, as a resultpercent of revenues, is largely driven by the higher mix of amusements, less discounting, lower hourly labor costs associated with labor efficiencies, and leveraging of certain fixed costs, including occupancy. Adjusted EBITDA was $76,705 or 28.9% of revenues in the first quarter of 2021.
COVID-19
pandemic, particularly
Ended the quarter with $139,081 in cash and approximately $492,500 of liquidity available under the Company’s revolving credit facility. The Company’s total leverage ratio, as a resultdefined in the existing credit facility, was approximately 0.7x as of a new Delta variant ofMay 1, 2022.
COVID-19,
which appears to be causing an increase in
COVID-19
cases. Public health officials and medical professionals have warned that a resurgence of
COVID-19
cases may continue, particularly if vaccination rates do not quickly increase or if additional potent variants emerge. It is unclear how long a resurgence may last, how severe it may be, and what safety measures governments may impose in response to it. For instance, a few jurisdictions that our stores operate have recently imposed proof of vaccination requirements for our customers and team members, and many of our stores have face mask requirements. We cannot predict with certainty how quickly our customers will return to our stores once all restrictions have been lifted or the impact this will have on consumer spending habits. Additionally, in connection with the
COVID-19
pandemic, there have been disruptions in various food and amusement supply chains, and we have incurred expenses to recall, hire and retain team members as our operating stores have
re-opened
and the majority of operating hour and capacity restrictions have been lifted.
General
We are a leading owner and operator of high-volume venues in North America that combine dining and entertainment for both adults and families under the name “Dave & Buster’s”. Founded in 1982, the core of our concept is to offer our customers the opportunity to “Eat Drink Play and Watch” all in one location. Eat and Drink are offered through a full menu of entrées and appetizers and a full selection of
non-alcoholic
and alcoholic beverages. Our Play and Watch offerings provide an extensive assortment of
18

Table of Contents
entertainment attractions centered around playing games and watching live sports and other televised events. Our brand appeals to a relatively balanced mix of male and female adults, as well as families and teenagers. We believe we appeal to a diverse customer base by providing a highly customizable experience in a dynamic and fun setting.
13

Our stores, which average 40,000 square feet, range in size between 16,000 and 70,000 square feet. OurGenerally, our stores are generally open seven days a week, with normal hours of operation typicallygenerally from 11:30 a.m. to midnight, with stores typically open for extended hours on Sunday through Thursday and 11:30 a.m. to 2:00 a.m. on Friday and Saturday.weekends.
Key Measures of Our Performance
We monitor and analyze several key performance measures to manage our business and evaluate financial and operating performance. These measures include:
Comparable store sales.
Comparable store sales are a comparison of sales to the same period of prior years for the comparable store base. We historically define the comparable store base to include those stores open for a full 18 months before the beginning of the fiscal year and excluding stores permanently closed during the period. Due to the limitations of store operations during the
COVID-19
pandemic, the comparable store base for fiscal 20212022 is defined as stores open for a full 18 months before the beginning of fiscal 2020 and excludes two stores that the Company elected not to reopen after they were closed in March 2020 as a result ofdue to local operating limitations. Aslimitations and one store in Cary, North Carolina that was closed and relocated during the fourth quarter of August 1, 2021,fiscal 2021. For the first quarter of fiscal 2022, our comparable store base consisted of 114113 stores.
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. Between AugustMay 3, 20202021 and AugustMay 1, 2021,2022, we closed and relocated one store and opened sevenan additional four new stores (five in fiscal 2020 and two in fiscal 2021) and we permanently closed two stores at the end or near the end of their respective lease terms.stores.
Non-GAAP
Financial Measures
In addition to the results provided in accordance with generally accepted accounting principles (“GAAP”), we provide
non-GAAP
measures which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP and include Adjusted EBITDA, Adjusted EBITDA Margin, Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin (defined below). These
non-GAAP
measures do not represent and should not be considered as an alternative to net income or cash flows from operations, as determined in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Although we use these
non-GAAP
measures to assess the operating performance of our business, they have significant limitations as an analytical tool because they exclude certain material costs. For example, Adjusted EBITDA does not take into account a number of significant items, including our interest expense and depreciation and amortization expense. In addition, Adjusted EBITDA excludes
pre-opening
and other costs which may be important in analyzing our GAAP results. Because Adjusted EBITDA does not account for these expenses, its utility as a measure of our operating performance has material limitations. Our calculations of Adjusted EBITDA adjust for these amounts because they vary from period to period and do not directly relate to the ongoing operations of the currently underlying business of our stores and therefore complicate comparison of underlying business between periods. Nevertheless, because of the limitations described above, management does not view Adjusted EBITDA or Store Operating Income Before Depreciation and Amortization in isolation and also uses other measures, such as revenues, gross margin, operating income and net income, to measure operating performance.
Adjusted EBITDA and Adjusted EBITDA Margin
. We define “Adjusted EBITDA” as net income (loss) plus interest expense, net, loss on debt extinguishment or refinancing, provision (benefit) for income taxes, depreciation and amortization expense, loss on asset disposal, impairment of long-lived assets, share-based compensation,
pre-opening
costs, currency transaction (gains) losses and other costs. “Adjusted EBITDA Margin” is defined as Adjusted EBITDA divided by total revenues.
Adjusted EBITDA is presented because we believe that it provides useful information to investors and analysts regarding our operating performance. By reporting Adjusted EBITDA, we provide a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.
Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin.
We define “Store Operating Income Before Depreciation and Amortization” as operating income (loss) plus depreciation and amortization expense, general and administrative expenses and
pre-opening
costs. “Store Operating Income Before Depreciation and Amortization Margin” is defined as Store Operating Income Before Depreciation and Amortization divided by total revenues. Store Operating Income Before Depreciation and Amortization Margin allows us to evaluate operating performance of each store across stores of varying size and volume.
19

We believe that Store Operating Income Before Depreciation and Amortization is another useful measure in evaluating our operating performance because it removes the impact of general and administrative expenses, which are not incurred at the store-level,
14

and the costs of opening new stores, which are
non-recurring
at the store-level, and thereby enables the comparability of the operating performance of our stores for the periods presented. We also believe that Store Operating Income Before Depreciation and Amortization is a useful measure in evaluating our operating performance within the entertainment and dining industry because it permits the evaluation of store-level productivity, efficiency and performance, and we use Store Operating Income Before Depreciation and Amortization as a means of evaluating store financial performance compared with our competitors. However, because this measure excludes significant items such as general and administrative expenses and
pre-opening
costs, as well as our interest expense, net and depreciation and amortization expense, which are important in evaluating our consolidated financial performance from period to period, the value of this measure is limited as a measure of our consolidated financial performance.
Presentation of Operating Results
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 in a
53-week
year when the fourth quarter has 14 weeks. All references to the secondfirst quarter of 2022 relate to the
13-week
period ended May 1, 2022. All references to the first quarter of 2021 relate to the
13-week
period ended August 1,May 2, 2021. All references to the secondfirst quarter of 20202019 relate to the
13-week
period ended August 2, 2020.May 5, 2019. Fiscal 2022, fiscal 2021 and fiscal 20202019 consist of 52 weeks. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.
Store-Level Variability, Quarterly Fluctuations, Seasonality and Inflation
We have historically operated stores varying in size and have experienced significant variability among stores in volumes, operating results and net investment costs.
Our new stores historically open with sales volumes in excess of their expected long-term
run-rate
levels, which we refer to as a “honeymoon” effect. We traditionally expect our new store sales volumes in year two to be 10% to 20% lower than our year one targets, and to grow in line with the rest of our comparable store base thereafter. As a result of the substantial revenues associated with each new store, the number and timing of new store openings may result in significant fluctuations in quarterly results.
In the first year of operation new store operating margins (excluding
pre-opening
expenses) typically benefit from honeymoon sales leverage on occupancy, management labor, and other fixed costs. This benefit is partially offset by normal inefficiencies in hourly labor and other costs associated with establishing a new store. In year two, operating margins may decline due to the loss of honeymoon sales leverage on fixed costs which is partially offset by improvements in store operating efficiency. Furthermore, rents in our new stores are typically higher than our comparable store base.
Our operating results fluctuate significantly due to seasonal factors. Typically, we have higher revenues associated with spring and
year-end
holidays which will continue to be susceptible to the impact of severe or unseasonably mild weather on customer traffic and sales during that period. Our third quarter, which encompasses the
back-to-school
fall season, has historically had lower revenues as compared to the other quarters.
We expect that economic and environmental conditions and changes in regulatory legislation will continue to exert pressure on both supplier pricing and consumer spending related to entertainment and dining alternatives. Although there is no assurance that our cost of products will remain stable or that federal, state or local minimum wage rates will not increase beyond amounts currently legislated, the effects of any supplier price increasesincrease or wage rate increases might be partially offset by selected menu price increases if competitively appropriate. In addition, how quickly, and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal business operations may be delayed or constrained by lingering effects of the
COVID-19
pandemic on us or our suppliers, third-party service providers, and/or customers.
 
2015

Thirteen Weeks Ended AugustMay 1, 20212022 Compared to Thirteen Weeks Ended AugustMay 2, 20202021
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 unaudited consolidated statements of comprehensive income (loss).income.
 
  
Thirteen Weeks
 
Thirteen Weeks
 
Ended
 
Ended
 
  
Thirteen Weeks
Ended
August 1, 2021
 
Thirteen Weeks
Ended
August 2, 2020
 
May 1, 2022
 
May 2, 2021
 
Food and beverage revenues
  $ 123,006    32.6 $17,002    33.4  $151,912    33.7 $85,758    32.3
Amusement and other revenues
   254,632    67.4   33,831    66.6    299,189    66.3   179,582    67.7 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total revenues
   377,638    100.0   50,833    100.0    451,101    100.0   265,340    100.0 
Cost of food and beverage (as a percentage of food and beverage revenues)
   33,127    26.9   4,659    27.4    43,255    28.5   23,157    27.0 
Cost of amusement and other (as a percentage of amusement and other revenues)
   24,584    9.7   4,025    11.9    26,766    8.9   16,614    9.3 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total cost of products
   57,711    15.3   8,684    17.1    70,021    15.5   39,771    15.0 
Operating payroll and benefits
   80,623    21.3   13,756    27.1    93,361    20.7   50,279    18.9 
Other store operating expenses
   105,116    27.9   62,682    123.2    124,425    27.5   84,445    31.9 
General and administrative expenses
   18,470    4.9   9,278    18.3    28,297    6.3   17,091    6.4 
Depreciation and amortization expense
   34,875    9.2   35,160    69.2    33,288    7.4   35,099    13.2 
Pre-opening
costs
   1,676    0.4   2,388    4.7    2,997    0.7   1,659    0.6 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Total operating costs
   298,471    79.0   131,948    259.6    352,389    78.1   228,344    86.0 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Operating income (loss)
   79,167    21.0   (81,115   (159.6
Operating income
   98,712    21.9   36,996    14.0 
Interest expense, net
   13,728    3.7   8,163    16.0    11,391    2.5   14,820    5.6 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Income (loss) before provision (benefit) for income taxes
   65,439    17.3   (89,278   (175.6
Provision (benefit) for income taxes
   12,669    3.3   (30,676   (60.3
Income before provision for income taxes
   87,321    19.4   22,176    8.4 
Provision for income taxes
   20,337    4.6   2,541    1.0 
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Net income (loss)
  $52,770    14.0 $(58,602   (115.3)% 
Net income
  $66,984    14.8 $19,635    7.4
  
 
   
 
  
 
   
 
   
 
   
 
  
 
   
 
 
Change in comparable store sales
(1)
     690.8    (87.0)%      71.1    56.5
Company-owned stores at end of period
(1)
     142     137      145     141 
Comparable stores at end of period
(1)
     114     115      113     114 
 
(1) 
As of the end of the secondfirst quarter of fiscal 2020, 842022, all our 145 stores were open and operating without any health restrictions. As of 137 total stores and 68the end of 115 comparablethe first quarter of fiscal 2021, 138 of our 141 stores were open and operating in limited capacity. Our comparable store count as of the end of the secondfirst quarter of fiscal 2020 includes2022 excludes a store in Houston, Texas that is nearCary, North Carolina, which was closed and relocated during the endfourth quarter of its lease term, which the Company decided not to
re-open.fiscal 2021.
 
2116

Reconciliations of
Non-GAAP
Financial Measures
Adjusted EBITDA
The following table reconciles (in dollars and as a percent of total revenues) Net income (loss) to Adjusted EBITDA for the periods indicated:
 
  
Thirteen Weeks
Ended
August 1, 2021
 
Thirteen Weeks
Ended
August 2, 2020
   
Thirteen Weeks
 
Thirteen Weeks
 
Net income (loss)
  $52,770    14.0 $(58,602   -115.3
  
Ended
 
Ended
 
  
May 1, 2022
 
May 2, 2021
 
Net income
  $66,984    14.8 $19,635    7.4
Interest expense, net
   13,728     8,163      11,391     14,820   
Provision (benefit) for income taxes
   12,669     (30,676  
Provision for income taxes
   20,337     2,541   
Depreciation and amortization expense
   34,875     35,160      33,288     35,099   
  
 
    
 
     
 
    
 
   
EBITDA
   114,042    30.2  (45,955   -90.4   132,000    29.3  72,095    27.2
Loss on asset disposal
   112     264      216     145   
Impairment of long-lived assets and lease termination costs
   —       2,178   
Share-based compensation
   3,187     2,734      3,555     2,971   
Pre-opening
costs
   1,676     2,388      2,997     1,659   
Other costs (1)
   135     (88     4,479     (165  
  
 
    
 
     
 
    
 
   
Adjusted EBITDA
  $ 119,152    31.6 $(38,479   -75.7  $143,247    31.8 $76,705    28.9
  
 
    
 
     
 
    
 
   
 
(1)
Primarily represents costs related to currency transaction (gains) or losses.the pending acquisition of Main Event. Refer to Note 8 of the unaudited financial statements for more information.
Store Operating Income Before Depreciation and Amortization
The following table reconciles (in dollars and as a percent of total revenues) Operating income (loss) to Store Operating Income Before Depreciation and Amortization for the periods indicated:
 
  
Thirteen Weeks
Ended
August 1, 2021
 
Thirteen Weeks
Ended
August 2, 2020
   
Thirteen Weeks
 
Thirteen Weeks
 
Operating income (loss)
  $79,167    21.0 $(81,115   -159.6
  
Ended
 
Ended
 
  
May 1, 2022
 
May 2, 2021
 
Operating income
  $98,712    21.9 $36,996    14.0
General and administrative expenses
   18,470     9,278      28,297     17,091   
Depreciation and amortization expense
   34,875     35,160      33,288     35,099   
Pre-opening
costs
   1,676     2,388      2,997     1,659   
  
 
    
 
     
 
    
 
   
Store Operating Income Before Depreciation and Amortization
  $ 134,188    35.5 $(34,289   -67.5  $163,294    36.2 $90,845    34.2
  
 
    
 
     
 
    
 
   
Capital Additions
The table below reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives or proceeds from sale-leaseback transactions (collectively, “Payments from landlords”).
 
  
Thirteen Weeks
   
Thirteen Weeks
 
  
Ended
   
Ended
 
  
Thirteen Weeks
Ended
August 1, 2021
   
Thirteen Weeks
Ended
August 2, 2020
   
May 1, 2022
   
May 2, 2021
 
New store and operating initiatives
  $12,611   $1,921   $35,131   $7,145 
Games
   9,443    810    1,512    3,171 
Maintenance capital
   6,402    838    6,311    1,888 
  
 
   
 
   
 
   
 
 
Total capital additions
  $28,456   $ 3,569   $42,954   $12,204 
  
 
   
 
   
 
   
 
 
Payments from landlords
  $2,085   $4,014   $713   $—   
 
2217

Table of Contents
Results of Operations
Revenues
In response to theMarch 2020, a novel strain of coronavirus
COVID-19(“COVID-19”)
outbreak which was declared a global pandemic on March 11, 2020 and a National Public Health EmergencyEmergency. Shortly after the national emergency declaration, state and local officials began placing restrictions on businesses, some of which allowed
To-Go
or curbside service only while others limited capacity in the United States on March 13, 2020, the Company temporarily closed all of our stores bydining room or arcade “(Midway”). By March 20, 2020.2020, all our 137 operating stores were temporarily closed. On April 30, 2020, our first store
re-opened
to the public, as state and local guidelines began to allow dining rooms and arcades to open with capacity and other restrictions, with two additional stores offering limited food and beverage for
off-premises
dining by the end of our first quarter of fiscal 2020. By the end of the second quarter of fiscal 2020, 84107 of our 137140 stores were open and operating. These stores were operating with a combination of limited menus, reduced dining room seating, reduced gamesgame availability in the midway,Midway, reduced operating hours and other restrictions referred to as “limited operations”. Of these 84 open stores, 68 were comparable stores. Between August 3, 2020 and August 1, 2021, we opened seven new stores (five or “operating in fiscal 2020 and two in fiscal 2021) and we permanently closed two stores at the end or nearlimited capacity.” As of the end of their respective lease terms. Asthe first quarter of August 1,fiscal 2021, all138 of our 141 stores were operating in some limited capacity. The Company
re-opened
the remaining stores that had been temporarily closed by the end of the Company’s 142 second quarter of fiscal 2021. During the first quarter of fiscal 2022 any remaining local
COVID-19
related operating restrictions on
re-opened
stores were open and operating, the majority of which having no operating restrictions.removed.
Selected revenue and store data for the periods indicated are as follows:
 
  
Thirteen Weeks Ended
   
Thirteen Weeks Ended
 
  
August 1, 2021
   
August 2, 2020
   
Change
   
May 1, 2022
   
May 2, 2021
   
Change
 
Total revenues
  $ 377,638   $ 50,833   $ 326,805   $451,101   $265,340   $185,761 
Total store operating weeks
   1,817    628    1,189    1,876    1,633    243 
Comparable store revenues
  $317,882   $40,199   $277,683   $368,477   $215,406   $153,071 
Comparable store operating weeks
   1,458    493    965    1,469    1,290    179 
Noncomparable store revenues
  $67,288    10,437   $56,851   $89,150    58,498   $30,652 
Noncomparable store operating weeks
   359    135    224    407    343    64 
Other revenues and deferrals
  $(7,532  $197   $(7,729  $(6,526  $(8,564  $2,038 
Total revenues increased $326,805,$185,761, or 642.9%70.0%, to $377,638$451,101 in the secondfirst quarter of fiscal 20212022 compared to total revenues of $50,833$265,340 in the secondfirst quarter of fiscal 2020.2021. The increase in revenue is attributable primarily to morea 14.9% increase in store operating weeks incompared to the secondfirst quarter of fiscal 2021, compared to the prior year as a resultwhen some of temporary store closures during the second quarter of fiscal 2020,our stores remained temporarily closed as a result of the
COVID-19
pandemic. Forpandemic, as well as the thirteen weeks ended August 1, 2021, we derived 22.4%removal of local
COVID-19
related operating restrictions on
re-opened
stores. Revenues during the first quarter of fiscal 2022 were also favorably impacted by an increase in the revenue per item sold and an increase in our totalspecial events business. The table below represents our revenue from food sales, 10.2% from beverage sales, 67.2% from amusement sales and 0.2% from other sources. Formix for the thirteen weeks ended August 2, 2020, we derived 22.2% of our total revenue from food sales, 11.2% from beverage sales, 66.6% from amusement sales and less than 0.1% from other sources.fiscal periods indicated. The shift in mix from amusement sales to food and beverage sales to amusement sales of 59165 basis points is due, in part, to reducedincreased special events, less discountingbeverage price increases during the first quarter of amusements,fiscal 2022, and greater capacity restrictions in our dining area due tofood price increases effective midway through the impactsthird quarter of thefiscal 2021.
COVID-19
pandemic.
   
Thirteen Weeks Ended
 
   
May 1, 2022
  
May 2, 2021
 
Food sales
   22.5  22.2
Beverage sales
   11.2  10.1
Amusement sales
   65.9  67.5
Other
   0.4  0.2
Comparable store revenue increased $277,683$153,071 or 690.8%71.1%, in the secondfirst quarter of fiscal 2022 compared to the first quarter of fiscal 2021, compareddue to the second quarter of fiscal 2020, due primarily to an 195.7%reasons noted above, including a 13.9% increase in comparable store operating weeks. Comparable store sales and comparable store weeks in the secondfirst quarter of fiscal 2021 were approximately 103.6% and 98.4%, respectively, of2022 increased 10.9% compared to the levels achieved
pre-pandemic
during the secondfirst quarter of fiscal 2019. Our individual comparable stores generally experienced gradual increases in weekly sales performance as operating weeks increased. Individual store performance after
re-opening
was also impacted by changes in local operating restrictions and consumer reactions to changes in local
COVID-19
infection rates.
Food sales at comparable stores increased by $60,957,$35,502, or 678.6%76.1%, to $69,940$82,138 in the secondfirst quarter of fiscal 20212022 from $8,983$46,636 in the secondfirst quarter of fiscal 2020.2021. Beverage sales at comparable stores increased by $28,006,$20,137, or 602.2%93.2%, to $32,657$41,734 in the secondfirst quarter of fiscal 20212022 from $4,651$21,597 in the 20202021 comparison period. Comparable store amusement and other revenues in the secondfirst quarter of fiscal 20212022 increased by $188,720,$97,432, or 710.4%66.2%, to $215,285$244,605 from $26,565$147,173 in the comparable period of fiscal 2020.2021.
Non-comparable
store revenue increased $56,851 in the second quarter of fiscal 2021 compared to the second quarter of fiscal 2020, for the same reasons noted above, including 224 more store operating weeks.
 
2318

Non-comparable
store revenue increased $30,652 in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021, for the same reasons noted above, including 64 more store operating weeks.
Cost of products
The total cost of products was $57,711$70,021 for the secondfirst quarter of fiscal 20212022 and $8,684$39,771 for the secondfirst quarter of fiscal 2020.2021. The total cost of products as a percentage of total revenues decreased 180increased 50 basis points to 15.3%15.5% for the secondfirst quarter of fiscal 20212022 compared to 17.1%15.0% for the secondfirst quarter of fiscal 2020.2021.
Cost of food and beverage products increased to $33,127$43,255 compared to $4,659$23,157 for the secondfirst quarter of fiscal 2020.2021. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased 50increased 150 basis points to 26.9%28.5% for the secondfirst quarter of fiscal 20212022 from 27.4%27.0% for the secondfirst quarter of fiscal 2020.2021. The impactunfavorable impacts of year-over-yearcommodity cost increases primarily in foodmeat and beveragedairy products andduring the absencefirst quarter of
COVID-19
related vendor payment concessions in the same period of the prior year fiscal 2022 were partially offset by lower closure-related spoilage costs.food and beverage price increases.
Cost of amusement and other increased to $24,584$26,766 in the secondfirst quarter of fiscal 20212022 compared to $4,025$16,614 in the secondfirst quarter of fiscal 2020.2021. The costs of amusement and other, as a percentage of amusement and other revenues, decreased 22040 basis points to 9.7%8.9% for the secondfirst quarter of fiscal 20212022 from 11.9%9.3% in the secondfirst quarter of fiscal 2020.2021. This decrease was driven primarily by lower ticket redemption activity as a percent of tickets issuedchange in prices at the second quarter ofgame level implemented late in fiscal 2021.
Operating payroll and benefits
Total operating payroll and benefits increased by $66,867,$43,082, or 486.1%85.7%, to $80,623$93,361 in the secondfirst quarter of fiscal 20212022 compared to $13,756$50,279 in the secondfirst quarter of fiscal 2020. Nearly all of our store workforce, with the exception of a small team of essential personnel, were furloughed in
mid-March
2020. Hourly team members began to return as stores
re-opened
at reduced staffing levels.2021. The total cost of operating payroll and benefits as a percentage of total revenues was 21.3%20.7% in the secondfirst quarter of fiscal 20212022 compared to 27.1%18.9% in the secondfirst quarter of fiscal 2020.2021. This decreaseincrease is primarily due to an increase in hourly labor cost and an increase in labor hours worked as open positions are filled, offset slightly by favorable leveraging on management labor and benefits and lower labor hours as a result of labor efficiency initiatives and hourly labor staffing shortages, partially offset by increases in the hourly wage rates and higher incentive compensation, including referral and retention incentives implemented during the second quarter of fiscal 2021.benefits.
Other store operating expenses
Other store operating expenses increased by $42,434,$39,980, or 67.7%47.3%, to $105,116$124,425 in the secondfirst quarter of fiscal 20212022 compared to $62,682$84,445 in the secondfirst quarter of fiscal 2020.2021. The increase is primarily due to the impact of increased store weeks during the secondfirst quarter of fiscal 20212022 on costs such as utilities, supplies, maintenance, and other services as well as a significant increase in marketing spend to align with the launch of its Summer of Games initiatives.services. Other store operating expense as a percentage of total revenues decreased to 27.9%27.5% in the secondfirst quarter of fiscal 20212022 compared to 123.2%31.9% in the secondfirst quarter of fiscal 2020.2021. This decrease was due primarily to favorable sales leveraging on occupancy costs and utilities and the absence of $1,178 in net charges for asset impairment and business interruption proceeds that were recorded in the second quarter of fiscal 2020.utilities.
General and administrative expenses
General and administrative expenses increased by $9,192,$11,206, or 99.1%65.6%, to $18,470$28,297 in the secondfirst quarter of fiscal 20212022 compared to $9,278$17,091 in the secondfirst quarter of fiscal 2020.2021. The increase in general and administrative expenses was driven primarily by higher incentive compensation, professional fees, salaries and benefits, board fees, and officer insurance. Duringshare-based compensation as well as costs related to the secondpotential acquisition of Main Event. General and administrative expenses, as a percentage of total revenues remained relatively unchanged at 6.3% in the first quarter of fiscal 2020, most of our corporate team members remained furloughed, with reduced pay and benefits for the remaining team members through2022 compared to 6.4% in the first seven weeksquarter of the quarter, and board fees were suspended.fiscal 2021, due primarily to favorable leverage.
Depreciation and amortization expense
Depreciation and amortization expense decreased by $285 or 0.8%,was slightly down to $34,875$33,288 in the secondfirst quarter of fiscal 20212022 compared to $35,160$35,099 in the secondfirst quarter of fiscal 2020.2021. Increased depreciation due to our 20212022 and 20202021 capital expenditures for new stores, operating initiatives, games, and maintenance capital, was more than offset by other assets reaching the end of their depreciable lives.
Pre-opening
costs
Pre-opening
costs decreasedincreased by $712$1,338 to $1,676$2,997 in the secondfirst quarter of fiscal 2022 compared to $1,659 in the first quarter of fiscal 2021 compared to $2,388 in the second quarter of fiscal 2020 due to a decreasean increase in the number of planned new store openings afterin the next six months compared to the same time period of the previous year, when construction was reduced as a result of the impacts of the
COVID-19
pandemic which began during the first quarter of fiscal 2020.pandemic.
Interest expense, net
 
2419

Interest expense, net
Interest expense, net increased decreased by $5,565$3,429 to $13,728$11,391 in the secondfirst quarter of fiscal 2022 compared to $14,820 in the first quarter of fiscal 2021 compared to $8,163 in the second quarter of fiscal 2020 due primarily to an increase in the weighted average effective interest rate, offset slightly by a decrease in average outstanding debt.debt, due to the prepayment of $110,000 outstanding principal amount of the senior secured notes during the second half of fiscal 2021.
Provision (benefit) for income taxes
The effective tax rate for the secondfirst quarter of fiscal 20212022 was 19.4%23.3%, compared to a benefit of 34.4%11.5% for the secondfirst quarter of fiscal 2020.2021. The currentprevious quarter tax provision includes higher excess tax benefits associated with share-based compensation while the prior quarter tax provision was a tax benefit primarily due to the impact of the
pre-tax
loss and the impact of the tax provisions within the CARES Act.
Twenty-Six
Weeks Ended August 1, 2021 Compared to
Twenty-Six
Weeks Ended August 2, 2020
Results of operations.
The following table sets forth selected data, in thousands of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying unaudited consolidated statements of comprehensive income (loss).
   
Twenty-Six
Weeks
Ended
August 1, 2021
  
Twenty-Six
Weeks
Ended
August 2, 2020
 
Food and beverage revenues
  $208,764    32.5 $80,922    38.4
Amusement and other revenues
   434,214    67.5   129,717    61.6 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total revenues
   642,978    100.0   210,639    100.0 
Cost of food and beverage (as a percentage of food and beverage revenues)
   56,284    27.0   22,003    27.2 
Cost of amusement and other (as a percentage of amusement and other revenues)
   41,198    9.5   14,753    11.4 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total cost of products
   97,482    15.2   36,756    17.4 
Operating payroll and benefits
   130,902    20.4   57,493    27.3 
Other store operating expenses
   189,561    29.4   158,354    75.3 
General and administrative expenses
   35,561    5.5   23,841    11.3 
Depreciation and amortization expense
   69,974    10.9   70,512    33.5 
Pre-opening
costs
   3,335    0.5   6,211    2.9 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total operating costs
   526,815    81.9   353,167    167.7 
  
 
 
   
 
 
  
 
 
   
 
 
 
Operating income (loss)
   116,163    18.1   (142,528   (67.7
Interest expense, net
   28,548    4.5   14,278    6.7 
  
 
 
   
 
 
  
 
 
   
 
 
 
Income (loss) before provision (benefit) for income taxes
   87,615    13.6   (156,806   (74.4
Provision (benefit) for income taxes
   15,210    2.3   (54,660   (25.9
  
 
 
   
 
 
  
 
 
   
 
 
 
Net income (loss)
  $72,405    11.3 $(102,146   (48.5)% 
  
 
 
   
 
 
  
 
 
   
 
 
 
Change in comparable store sales (1)
     199.1    (72.2)% 
Company-owned stores at end of period (1)
     142     137 
Comparable stores at end of period (1)
     114     115 
(1) 
As of the end of the second quarter of fiscal 2020, 84 of 137 total stores and 68 of 115 comparable stores were open and operating in limited capacity. Our comparable store count as of the end of the second quarter of fiscal 2020 includes a store in Houston, Texas that is near the end of its lease term, which the Company decided not to
re-open.
25

Reconciliations of
Non-GAAP
Financial Measures
Adjusted EBITDA
The following table reconciles (in dollars and as a percent of total revenues) Net income (loss) to Adjusted EBITDA for the periods indicated:
   
Twenty-Six
Weeks
Ended
August 1, 2021
  
Twenty-Six
Weeks
Ended
August 2, 2020
 
Net income (loss)
  $72,405    11.3 $(102,146   -48.5
Interest expense, net
   28,548     14,278   
Provision (benefit) for income taxes
   15,210     (54,660  
Depreciation and amortization expense
   69,974     70,512   
  
 
 
    
 
 
   
EBITDA
   186,137    28.9  (72,016   -34.2
Loss on asset disposal
   257     417   
Impairment of long-lived assets and lease termination costs
   —       13,727   
Share-based compensation
   6,158     2,345   
Pre-opening
costs
   3,335     6,211   
Other costs (1)
   (30    59   
  
 
 
    
 
 
   
Adjusted EBITDA
  $195,857    30.5 $(49,257   -23.4
  
 
 
    
 
 
   
(1) 
Primarily represents costs related to currency transaction (gains) or losses.
Store Operating Income Before Depreciation and Amortization
The following table reconciles (in dollars and as a percent of total revenues) Operating income (loss) to Store Operating Income Before Depreciation and Amortization for the periods indicated:
   
Twenty-Six
Weeks
Ended
August 1, 2021
  
Twenty-Six
Weeks
Ended
August 2, 2020
 
Operating income (loss)
  $116,163    18.1 $(142,528   -67.7
General and administrative expenses
   35,561     23,841   
Depreciation and amortization expense
   69,974     70,512   
Pre-opening
costs
   3,335     6,211   
  
 
 
    
 
 
   
Store Operating Income Before Depreciation and Amortization
  $225,033    35.0 $(41,964)    -19.9
  
 
 
    
 
 
   
Capital Additions
The table below reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives or proceeds from sale-leaseback transactions (collectively, “Payments from landlords”).
   
Twenty-Six Weeks

Ended
August 1, 2021
   
Twenty-Six Weeks

Ended
August 2, 2020
 
New store and operating initiatives
  $19,756   $40,522 
Games
   12,614    8,718 
Maintenance capital
   8,290    1,780 
  
 
 
   
 
 
 
Total capital additions
  $40,660   $51,020 
  
 
 
   
 
 
 
Payments from landlords
  $2,085   $4,014 
26

Results of Operations
Revenues
Selected revenue and store data for the periods indicated are as follows:
   
Twenty-Six
Weeks Ended
 
   
August 1,
2021
   
August 2,
2020
   
Change
 
Total revenues
  $642,978   $210,639   $432,339 
Total store operating weeks
   3,450    1,461    1,989 
Comparable store revenues
  $534,827   $178,835   $355,992 
Comparable store operating weeks
   2,761    1,190    1,571 
Noncomparable store revenues
  $124,247    34,671   $89,576 
Noncomparable store operating weeks
   689    271    418 
Other revenues and deferrals
  $(16,096  $(2,867  $(13,229
Total revenues increased $432,339, or 205.3%, to $642,978 in the
twenty-six
weeks ended August 1, 2021 compared to total revenues of $210,639 in the comparable period of fiscal 2020. The increase in revenue is attributable primarily to more store operating weeks in the
twenty-six
weeks ended August 1, 2021 compared to the prior year which was impacted by more temporary store closures and store capacity limitations due to the
COVID-19
pandemic. For the
twenty-six
weeks ended August 1, 2021, we derived 22.3% of our total revenue from food sales, 10.2% from beverage sales, 67.3% from amusement sales and 0.2% from other sources. For the
twenty-six
weeks ended August 2, 2020, we derived 25.3% of our total revenue from food sales, 13.1% from beverage sales, 61.1% from amusement sales and 0.5% from other sources. The shift in mix from food and beverage sales to amusement sales of 627 basis points is due, in part, to reduced special events, less discounting of amusements, and greater capacity restrictions in our dining area due to the impacts of the
COVID-19
pandemic.
Comparable store revenue increased $355,992 or 199.1%, in the
twenty-six
weeks ended August 1, 2021 compared to the comparable period of fiscal 2020, due primarily to a 132.0% increase in comparable store operating weeks. Comparable store sales and comparable store weeks in the
twenty-six
weeks ended August 1, 2021 were approximately 83.3% and 93.2%, respectively, of the levels achieved
pre-pandemic
during the
twenty-six
weeks ended August 4, 2019. Our individual comparable stores generally experienced gradual increases in weekly sales performance as operating weeks increased. Individual store performance after
re-opening
was impacted by changes in local operating restrictions and consumer reactions to changes in local
COVID-19
infection rates.
Food sales at comparable stores increased by $72,061, or 160.7%, to $116,896 in the
twenty-six
weeks ended August 1, 2021 from $44,835 in the comparable period of fiscal 2020. Beverage sales at comparable stores increased by $30,838, or 130.9%, to $54,389 in the
twenty-six
weeks ended August 1, 2021 from $23,551 in the 2020 comparison period. Comparable store amusement and other revenues in the
twenty-six
weeks ended August 1, 2021 increased by $253,093, or 229.1%, to $363,542 from $110,449 in the comparable
twenty-six
weeks of fiscal 2020.
Non-comparable
store revenue increased $89,576 in the
twenty-six
weeks ended August 1, 2021 compared to the comparable period of fiscal 2020, for the same reasons noted above, including 418 more store operating weeks.
Cost of products
The total cost of products was $97,482 for the
twenty-six
weeks ended August 1, 2021 and $36,756 for the comparable period of fiscal 2020. The total cost of products as a percentage of total revenues decreased 220 basis points to 15.2% for the
twenty-six
weeks ended August 1, 2021 compared to 17.4% for the comparable period of fiscal 2020.
Cost of food and beverage products increased to $56,284 compared to $22,003 for the
twenty-six
weeks ended August 1, 2021. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased 20 basis points to 27.0% for the
twenty-six
weeks ended August 1, 2021 from 27.2% for the comparable period of fiscal 2020. The impact of year-over-year cost increases in food and beverage products and the absence of
COVID-19
related vendor payment concessions in the same period of the prior year were partially offset by lower closure-related spoilage costs.
27

Cost of amusement and other increased to $41,198 in the
twenty-six
weeks ended August 1, 2021 compared to $14,753 in the comparable period of fiscal 2020. The costs of amusement and other, as a percentage of amusement and other revenues, decreased 190 basis points to 9.5% for the
twenty-six
weeks ended August 1, 2021 from 11.4% in the comparable period of fiscal 2020. This decrease was driven primarily by lower ticket redemption activity as a percent of tickets issued in the
twenty-six
weeks ended August 1, 2021.
Operating payroll and benefits
Total operating payroll and benefits increased by $73,409, or 127.7%, to $130,902 in the
twenty-six
weeks ended August 1, 2021 compared to $57,493 in the
twenty-six
weeks ended August 2, 2020. Nearly all our store workforce,credits associated with the exceptionreversal of a small team of essential personnel, were furloughed in
mid-March
2020. Hourly team members began to return as stores
re-opened
at reduced staffing levels. The total cost of operating payroll and benefits as a percentage of total revenues was 20.4% in the
twenty-six
weeks ended August 1, 2021 compared to 27.3% in the
twenty-six
weeks ended August 2, 2020. This decrease is primarily due to favorable leveraging on management labor and benefits and lower labor hours as a result of labor efficiency initiatives and hourly labor staffing shortages, partially offset by increases in the hourly wage rates and higher incentive compensation, including referral and retention incentives implemented during the second quarter of fiscal 2021.
Other store operating expenses
Other store operating expenses increased by $31,207, or 19.7%, to $189,561 in the
twenty-six
weeks ended August 1, 2021 compared to $158,354 in the
twenty-six
weeks ended August 2, 2020. The increase is primarily due to the impact of increased store weeks during the
twenty-six
weeks ended August 1, 2021 on costs such as utilities, supplies, maintenance, and other services as well as a significant increase in marketing spend to align with the launch of its Summer of Games initiatives. These increases were offset somewhat by a $13,727 charge for impairment of long-lived assets and lease termination costs incurred during the
twenty-six
weeks ended August 2, 2020. Other store operating expense as a percentage of total revenues decreased to 29.4% in the
twenty-six
weeks ended August 1, 2021 compared to 75.3% in the
twenty-six
weeks ended August 2, 2020. This decrease was due primarily to favorable sales leveraging on occupancy costs and utilities and the absence of any impairment charges in fiscal 2021.
General and administrative expenses
General and administrative expenses increased by $11,720, or 49.2%, to $35,561 in the
twenty-six
weeks ended August 1, 2021 compared to $23,841 in the
twenty-six
weeks ended August 2, 2020. The increase in general and administrative expenses was driven primarily by higher incentive compensation, salaries and benefits, share-based compensation, board fees and officer insurance, offset somewhat by lower professional fees. During the first
twenty-six
weeks of fiscal 2020, most of our corporate team members were furloughed, with reduced pay and benefits for the remaining team members for a twelve-week period, and board fees were suspended. Share-based compensation was also lower during that same time period due to changes in performance stock unit expense.
Depreciation and amortization expense
Depreciation and amortization expense decreased by $538 or 0.8%, to $69,974 in the
twenty-six
weeks ended August 1, 2021 compared to $70,512 in the
twenty-six
weeks ended August 2, 2020. Increased depreciation due to our 2021 and 2020 capital expenditures for new stores, operating initiatives, games and maintenance capital, was offset by other assets reaching the end of their depreciable lives.
Pre-opening
costs
Pre-opening
costs decreased by $2,876 to $3,335 in the
twenty-six
weeks ended August 1, 2021 compared to $6,211 in the
twenty-six
weeks ended August 2, 2020 due to a decrease in the number of planned new store openings after construction was reduced as a result of impacts of the
COVID-19
pandemic which began during the first quarter of fiscal 2020.
Interest expense, net
Interest expense, net increased by $14,270 to $28,548 in the
twenty-six
weeks ended August 1, 2021 compared to $14,278 in the
twenty-six
weeks ended August 2, 2020 due primarily to an increase in the weighted average effective interest rate, offset slightly by a decrease in average outstanding debt.
28

Provision (benefit) for income taxes
The effectivecertain tax rate for the
twenty-sixvaluation allowances.
weeks ended August 1, 2021, was 17.4%, compared to a benefit of 34.9% for the
twenty-six
weeks ended August 2, 2020. The current year tax provision includes higher excess tax benefits associated with share-based compensation while the prior year was a tax benefit primarily due to the impact of the
pre-tax
loss and the impact of the tax provisions within the CARES Act.
Liquidity and Capital Resources
In response
Debt
We maintain a $500,000 unsecured revolving credit facility, which matures on August 17, 2024. Availability under the revolving credit facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs. At the business disruption caused by the
COVID-19
pandemic which began inend of the first quarter of fiscal 2020,2022, we had letters of credit outstanding of $7,505 and an unused commitment balance of $492,495 under the Company took the following actions to enable it to meet its obligations over the next twelve months:
reduced expenses broadly and canceled or delayed all
non-essential
planned capital spending and halted or delayed planned store openings, except stores that commenced construction prior to the
COVID-19
pandemic;
indefinitely suspended cash dividends and allowed our share repurchase program to expire;
sold shares of our common stock, generating gross proceeds of $185,600;
negotiated two amendments with our lenders, resulting in an extension of the maturity date of our revolving credit facility to August 17, 2024 and relief from testing compliance with certain financial covenants until the last day of the fiscal quarter ending on May 1, 2022;facility.
issued $550,000 of senior secured notes, maturing November 1, 2025; and
negotiated with our landlords, vendors, and other business partners to temporarily reduce our lease and contract payments and obtain other concessions. During fiscal 2020, a total of 126 initial rent relief agreements related to our operating locations and corporate headquarters were initially executed, which generally provide for full deferral for three months beginning April 2020, with partial deferral continuing for periods of up to six months, at approximately 50% of those locations. As the
COVID-19
pandemic continued to impact our business into the fourth quarter, the Company renewed negotiations with the majority of these landlords in order to provide additional rent relief, generally seeking to push out or extend the terms of deferral pay back periods and/or provide rent relief beyond the periods in the initial agreements. As of the end of the second quarter of fiscal 2021, the Company had executed 97 of these additional rent relief agreements.
Although uncertainty persists surrounding
COVID-19,
particularly as a result of a new Delta variant of
COVID-19,
including the potential that a resurgence of
COVID-19
cases may continue, how long such a resurgence may last, how severe it may be, and what safety measures governments may impose in response to it, as well as how quickly customers will return to our stores, the Company has taken measures to provide sufficient liquidity to meet estimated cash flow needs and covenant compliance obligations for at least the next twelve months. All the Company’s stores were open and operating as of the end of the second quarter of fiscal 2021, and as of August 1, 2021, the Company had cash and cash equivalents of $107,801. We expect to spend between $95,000 and $100,000, net of payments from landlords in capital additions during fiscal 2021. On an ongoing basis, we will continue to pursue long-term operating efficiencies and other cost savings initiatives.
The Company is also taking measures to strengthen its financial position. Subsequent to the end of our second quarter, the Company notified the trustee of the Notes that it intends to redeem $55,000 outstanding principal amount of the Notes. The redemption is expected to take place prior to the end of the Company’s third quarter which ends on October 31, 2021. In connection with the early redemption of the Notes, the Company will pay a prepayment premium of $1,650, plus accrued and unpaid interest to the date of redemption, pursuant to the terms of the indenture governing the Notes. The early redemption is expected to save approximately $17,000 of net cash interest over the remaining life of the Notes.
Debt and Derivatives
Effective April 14, 2020, we amended our existing credit facility, to provide relief from compliance with financial covenants through the third quarter of fiscal 2020. The interest rate spread increased to 2.00% plus a LIBOR floor of 1.00%.
On October 27, 2020, the Company issued $550,000 aggregate principal amount of 7.625% senior secured notes (the “Notes”). during fiscal 2020. Interest on the Notes accrues from October 27, 2020 and is payable in arrears on November 1 and May 1 of each year, commencing on May 1, 2021.year. The Notes mature on November 1, 2025, unless earlier redeemed, and are subject to the terms and conditions set forth in the related indenture. Prior to November 1, 2022, but not more than once during any twelve-month period commencing with the issue date of the Notes,During fiscal 2021, the Company may redeem up to 10%redeemed a total of the original$110,000 outstanding principal amount of the Notes at a redemption pricein two separate transactions, and paid prepayment premiums of 103% of the principal amount,$3,300, plus accrued and unpaid interest atto the redemption date. After November 1,date of redemptions. The early redemptions are expected to reduce net cash interest on the Notes by approximately $8,400 annually. Beginning October 27, 2022, the Company may elect to further redeem the Notes, in whole or in part, at certain specified redemption prices, plus accrued and unpaid interest, at the redemption date.
The Notes were issued by Dave & Buster’s, Inc. and are unconditionally guaranteed by Dave & Buster’s Holdings, Inc. and certain of Dave & Buster’s, Inc. existing and future wholly owned material domestic subsidiaries, which is substantially the same as the guarantors of the Company’sinterest rates per annum applicable to loans under our existing credit facility.
29

1.00%. Concurrent and subject to the issuance of the Notes, the Company entered into a second amendment to its existing credit facility, which included relief from testing compliance with certain financial covenants until the last day of the fiscal quarter ending on May 1, 2022. During the financial covenant suspension period the Company is required to maintain a minimum liquidity (primarily availability under the credit facility) of $150,000. The second amendment extended the maturity date of the $500,000 revolving portion of the facility, from August 17, 2022 to August 17, 2024,and during the financial covenant suspension increased pricing period, increased the interest rate spread to 4.00% during the financial covenant suspension period, and instituted a 1.00% utilization fee during that same time period. The utilization fee is due at maturity. The financial covenant suspension period mayfee. Shortly after the end earlier, atof the Company’s election, if certain predetermined financial covenant ratios are achieved. After the financial covenant suspension period,first quarter of fiscal 2022, the interest rate spread rangeswill range from 1.25% to 3.00%. The second amendment terminated and the term loan portion of the credit facility,utilization fee, which triggered payment of $1,900 of lender debt costs associated with the first amendment.is due at maturity, will cease.
The Company usedFor the proceeds of the Notes offering, along with cash on hand, to repay the $255,000 principal balance of the term loan facility, $463,000 of borrowings under the revolving credit facility, and related accrued interest. The Company incurred debt issuance costs of $18,300, which are being amortized over the terms of the respective Notes and revolving credit facility. The Company also recorded a loss of $904 related to the unamortized debt costs associated with the term portion of the credit facility.
For the
twenty-six
thirteen weeks ended AugustMay 1, 2022, and May 2, 2021, and August 2, 2020,respectively, the Company’s weighted average effective interest rate on outstanding borrowingsour total debt facilities (before capitalized interest amounts) was 10.17%10.90% and 3.98%10.15%, respectively. The rate has increased due to the issuance of the Notes and the second amendment to the credit facility. As of August 1, 2021, we had letters of credit outstanding of $10,486 and an unused commitment balance of $489,514 under the revolving credit facility.
Our credit facility and Notes contain restrictive covenants that, among other things, place certain limitations on our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, pay dividends, acquire other businesses or sell assets.
During fiscal 2019, we entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates on our variable rate credit facility. Our swap agreements with our derivative counterparties contain a provision where if As of May 1, 2022, the Company defaults on anywas in compliance with the financial covenants of its indebtednessour credit facility and repaymentall the restrictive covenants of the indebtedness has been accelerated,Notes and credit facility.
On April 6, 2022, the Company could also be declared in default onannounced its derivative obligations. Referentry into an Agreement and Plan of Merger, pursuant to Note 1which the Company has agreed to acquire 100% of the Consolidated Financial Statementsequity interests of Ardent Leisure Holding US, Inc. (“Ardent US”), doing business as “Main Event”, in exchange for further discussioncash consideration of our swap agreements, which were
de-designated
as hedges effective April 14, 2020,$835 million (to be adjusted for cash on hand, Ardent US transaction expenses, payments pursuant to Ardent US’s long term incentive plan, certain capital expenditures, and certain agreed upon working capital adjustments) less the dateindebtedness of Ardent US immediately prior to the closing of the first amendmenttransaction. The closing of the transaction is subject to our creditcompletion of customary closing conditions, including approval by the shareholders of Ardent Leisure Group, and the transaction is expected to close in the second quarter. We expect the full amount of the cash consideration paid will be funded by a new term loan facility.
Dividends and Share Repurchases
As
20

On December 6, 2021, our Board of Directors approved a result of the impacts to our business arising from the
COVID-19
pandemic, dividend payments have been indefinitely suspended, and the previously established share repurchase program was allowed to expirewith an authorization limit of $100,000, expiring at the end of fiscal 2020.2022. Future decisions to pay cash dividends or repurchase shares continue to be at the discretion of the Board of Directors and will be dependent on our operating performance, financial condition, capital expenditure requirements and other factors that the Board of Directors considers relevant. There were no dividends declared or share repurchases during the first quarter of 2022.    
Cash Flow Summaryand Cash Equivalents
AsAll the Company’s stores were open and operating as of Augustthe end of the first quarter of fiscal 2022, and as of May 1, 2021,2022, the Company had cash and cash equivalents of $107,801.$139,081. The Company can operate with a working capital deficit because cash from sales is usually received before related liabilities for product supplies, labor and services become due. Our operations do not require significant inventory or receivables and we continually invest in our business through the growth of stores and operating improvement additions, which are reflected as noncurrent assets and not a part of working capital. Based on our current business plan, we believe our cash and cash equivalents combined with expected cash flows from operations, available borrowings under our revolving credit facility and expected payments from landlords should be sufficient not only for our operating requirements but also to enable us, in the aggregate, to finance our
non-acquisition
related capital allocation strategy, including capital expenditures, through at least the next twelve months.
A comparison of our cash flow activity for the first quarter of fiscal 2022 to the same period of fiscal 2021 follows.
Operating Activities
— Cash flow from operations typically provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, employee compensation, operations, and occupancy costs. Cash from operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, the timing of cash receipts and payments, and vendor payment terms.
Cash flow from operating activities increased $211,592approximately $71,400 in the
twenty-six
weeks ended August 1, 2021 first quarter of fiscal 2022 compared to the
twenty-six
weeks ended August 2, 2020 first quarter of fiscal 2021 driven primarily by improved operating margins, approximately 243 more store weeks, and the impactreceipt of a federal tax refund in the amount of approximately 1,989 more store weeks.$33,200.
Investing Activities
— Cash flow from investing activities primarily reflects capital expenditures.
During the
twenty-six
weeks ended August 1, 2021, first quarter of fiscal 2022, the Company spent approximately $18,900$31,300 for new store construction and operating improvement initiatives ($16,80030,600 net of payments from landlords), $11,000$1,400 for game refreshment and $8,000$7,400 for maintenance capital.
30

During the
twenty-six
weeks ended August 2, 2020, first quarter of fiscal 2021, the Company spent approximately $48,800$7,600 for new store construction and operating improvement initiatives, ($44,800 net of payments from landlords), $8,600$2,100 for game refreshment and $6,100$700 for maintenance capital.
Financing Activities
There was no significant financing activity during the first quarter of fiscal 2022. During the
twenty-six
weeks ended August 1, first quarter of fiscal 2021, the Company had net repayments of $60,000 of its revolving credit facility. During the
twenty-six
weeks ended August 2, 2020, the Company received $99,500 of net proceeds from borrowings of debt and approximately $182,200 of net proceeds from the issuance of shares of our common stock.
Contractual Obligations and Commitments
There have been no material changes outside the ordinary course of business to our contractual obligations since January 31, 2021,30, 2022, as reported on
Form10-K
filed with the SEC on March 31, 2021.29, 2022.
Accounting policies and estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosures of contingent assets and liabilities. These estimates and assumptions affect amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the date of the consolidated financial statements. Our current estimates are subject to change if different assumptions as to the outcome of future events were made. We evaluate our estimates and judgments on an ongoing basis, and we adjust our assumptions and judgments when facts and circumstances dictate. Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates we used in preparing the accompanying consolidated financial statements. A complete description of our critical accounting policies and estimates is included in our annual consolidated financial statements and the related notes in our Annual Report on Form
10-K
filed with the SEC on March 31, 2021.29, 2022.
Recent accounting pronouncements
Refer to Note 1 to the Unaudited Consolidated Financial Statements for information regarding new accounting pronouncements.
 
21

Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
We are exposed to market price fluctuation in food, beverage, supplies and beverage product prices.other costs such as energy. Given the historical volatility of certain of our food product prices, including proteins, seafood, produce, dairy products, and cooking oil, these fluctuations can materially impact our food costs. While our purchasing commitments partially mitigate the risk of such fluctuations, there is no assurance that supply and demand factors such as disease or inclement weather will not cause the prices of the commodities used in our restaurant operations to fluctuate. Additionally, the cost of purchased materials may be influenced by tariffs and other trade regulations which are outside of our control. To the extent that we do not pass along cost increases to our customers, our results of operations may be adversely affected. At this time, we do not use financial instruments to hedge our commodity risk.
Interest Rate Risk
Our variable rate indebtedness under
Outstanding borrowings on our $500,000 revolving credit facility isare based on
one-month
variable rates, and we have historically elected to use LIBOR. Although our borrowing arrangements provide for alternative base rates other than LIBOR, withthose rates have historically been higher than those we paid based on LIBOR (which currently is subject to a LIBOR floor of 1.00%). OurWhen LIBOR ceases to exist, we will likely need to agree upon a replacement index with our lenders, and the interest rate swap agreements, with a combined notional amount of $350,000, convert
one-month
LIBOR to a fixed interest rate of approximately 2.47% through August 17, 2022.thereunder will likely change. As of AugustMay 1, 2021,
one-month2022, there was no balance outstanding on our revolving credit facility.
LIBOR is below 1.00%.
Inflation
The primary inflationary factors affectingSevere increases in inflation could affect the United States or global economies and have an adverse impact on our operations are food, amusement offerings,business, financial condition and results of operation. If several of the various costs in our business experience inflation at the same time, such as commodity price increases beyond our ability to control and increased labor costs, and energy costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases. Finally, the cost of constructing our stores is subject to inflationary increases in the costs of labor and material.
A large portion of our hourly employees are paid wage rates at or based on the applicable federal, state or city minimum wage and increases in the minimum wage will increase our labor costs. Several states and local jurisdictions in which we operate have enacted legislation to increase the minimum wage and/or minimum tipped wage rates by varying amounts, with more planned increases in the future.
In general, we have been able to partially offset cost increases resulting from inflation by increasing prices of food and amusement offerings, improving productivity, or other operating changes. We may or may not be able to adjust prices to sufficiently offset the effect of the various cost increases in the future.without negatively impacting consumer demand.
 
31

Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the Interim Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules
13a-15
and
15d-15
promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, the Interim Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in the Exchange Act
Rules 13a-15(f)
and
15d-15(f))
that occurred during our secondfirst quarter ended AugustMay 1, 2021,2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings
Information regarding legal proceedings is incorporated by reference from Note 5 to our Unaudited Consolidated Financial Statements set forth in Part I of this report.
 
Item 1A.
Risk Factors
There have been no material changes inThe Company is supplementing the risk factorsRisk Factors previously disclosed in ourItem 1A of the Annual Report as filed on Form
10-K
on March 31, 2021.for the fiscal year ended January 30, 2022, (the “Annual Report”). The following Risk Factor should be read in conjunction with the Risk Factors disclosed in the Annual Report.
We may acquire a business in the future that we fail to effectively integrate or operate.
We recently announced an agreement and plan of merger to acquire a business as part of our expansion effort. If the acquisition is finalized, we may not be successful in integrating future acquisitions into our existing operations, which may result in unforeseen operational difficulties, diminished financial performance or our inability to report financial results and may require a disproportionate amount of our management’s attention. If we fail to manage future acquisitions effectively, our results of operations could be adversely affected.
 
3222

Our potential acquisition and any future acquisitions will be accompanied by the risks commonly encountered in acquisitions, including:
incorrect assumptions regarding the future results of acquired operations or assets or expected cost reductions or other synergies expected to be realized from acquiring operations or assets;
failure to integrate the operations or management of any acquired operations or assets successfully and timely;
potential loss of key employees and customers of the acquired companies;
potential lack of experience operating in a geographic market or product line of the acquired business;
an increase in our expenses, particularly overhead expenses, and working capital requirements;
the possible inability to achieve the intended objectives of the business combination; and
the diversion of management’s attention from existing operations or other priorities.
23

Item 2.
Unregistered Sales of Equity Securities
There were no repurchases of our common stock under our share repurchase plan during the thirteen weeks ended AugustMay 1, 2021.2022.
 
3324

Item 6.
    Exhibits
 
Exhibit
Number
  
Description
10.1*Form of Employment Agreement (May 2022 version) by and among Dave & Buster’s Management Corporation, Dave & Buster’s Entertainment, Inc. and the various executive officers of Dave & Buster’s Entertainment, Inc.
31.1*  Certification of Brian A. Jenkins,Kevin M. Sheehan, Interim Chief Executive Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a).
31.2*  Certification of Scott J. Bowman,Michael A. Quartieri, Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a).
32.1*  Certification of Brian A. Jenkins,Kevin M. Sheehan, Interim Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*  Certification of Scott J. Bowman,Michael A. Quartieri, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101101.INS  XBRL Inline Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.document
101.SCH  XBRL Inline Taxonomy Extension Schema Document.Document
101.CAL  XBRL Inline Taxonomy Extension Calculation Linkbase Document.Document
101.DEF  XBRL Inline Taxonomy Extension Definition Linkbase Document.Document
101.LAB  XBRL Inline Taxonomy Extension Label Linkbase Document.Document
101.PRE  XBRL Inline Taxonomy Extension Presentation Linkbase Document.Document
104  Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
 
*
Filed herein
 
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  
DAVE & BUSTER’S ENTERTAINMENT, INC.,
a Delaware corporation
Date: September 9, 2021June 7, 2022  By: /s/ Brian A. Jenkins
Kevin M. Sheehan
   BrianKevin M. Sheehan
Interim Chief Executive Officer
Date: June 7, 2022By:/s/ Michael A. JenkinsQuartieri
Michael A. Quartieri
   Chief ExecutiveFinancial Officer
 
Date: September 9, 2021
By:
/s/ Scott J. Bowman
Scott J. Bowman
Chief Financial Officer
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