Dave & Buster's(PLAY) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's comprehensive financial data, including statements, notes, and management's analysis of performance and financial condition Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, statements of comprehensive income, statements of stockholders' equity, and statements of cash flows, along with their accompanying notes. It provides a snapshot of the company's financial position, performance, and cash movements for the reported periods Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Summary | ASSETS | August 6, 2024 (Unaudited) | February 4, 2024 (Audited) | | :-------------------------- | :------------------------- | :------------------------- | | Total current assets | $96.1 | $137.5 | | Property and equipment (net)| $1,425.2 | $1,332.7 | | Operating lease ROU assets | $1,348.7 | $1,323.3 | | Goodwill | $742.5 | $742.5 | | Total assets | $3,833.9 | $3,754.4 | | LIABILITIES | | | | Total current liabilities | $408.2 | $435.6 | | Operating lease liabilities | $1,589.5 | $1,558.5 | | Long-term debt, net | $1,292.4 | $1,284.0 | | Total stockholders' equity | $284.4 | $251.2 | | Total liabilities and equity| $3,833.9 | $3,754.4 | - Total assets increased by $79.5 million from $3,754.4 million as of February 4, 2024, to $3,833.9 million as of August 6, 2024, primarily driven by an increase in property and equipment[6] - Total stockholders' equity increased by $33.2 million from $251.2 million as of February 4, 2024, to $284.4 million as of August 6, 2024[6] Consolidated Statements of Comprehensive Income This section details the company's revenues, expenses, and net income over specific reporting periods Consolidated Statements of Comprehensive Income Summary | Metric (in millions) | Thirteen Weeks Ended August 6, 2024 | Thirteen Weeks Ended July 30, 2023 | Twenty-Six Weeks Ended August 6, 2024 | Twenty-Six Weeks Ended July 30, 2023 | | :-------------------------- | :---------------------------------- | :--------------------------------- | :------------------------------------ | :----------------------------------- | | Total revenues | $557.1 | $542.1 | $1,145.2 | $1,139.4 | | Operating income | $84.5 | $77.1 | $170.0 | $198.5 | | Net income | $40.3 | $25.9 | $81.7 | $96.0 | | Diluted EPS | $0.99 | $0.60 | $1.99 | $2.09 | - For the thirteen weeks ended August 6, 2024, total revenues increased by $15.0 million (2.8%) and net income increased by $14.4 million (55.6%) compared to the prior year period[7] - For the twenty-six weeks ended August 6, 2024, total revenues increased by $5.8 million (0.5%) while net income decreased by $14.3 million (14.9%) compared to the prior year period[7] Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including common stock, paid-in capital, treasury stock, and retained earnings Stockholders' Equity Summary | Equity Component (in millions) | Balance February 4, 2024 | Balance August 6, 2024 | | :----------------------------- | :----------------------- | :--------------------- | | Common Shares | 62.86 | 63.15 | | Common Stock Amount | $0.6 | $0.6 | | Paid-In Capital | $597.6 | $611.4 | | Treasury Stock Amount | $(945.3) | $(1,007.5) | | Retained Earnings | $599.2 | $680.9 | | Total Stockholders' Equity | $251.2 | $284.4 | - Total stockholders' equity increased from $251.2 million at February 4, 2024, to $284.4 million at August 6, 2024, primarily due to net income and share-based compensation, partially offset by common stock repurchases[9][12] - The company repurchased common stock totaling $11.5 million and $50.7 million during the periods ended May 5, 2024, and August 6, 2024, respectively[9] Consolidated Statements of Cash Flows This section reports the cash generated and used by operating, investing, and financing activities over specific periods Cash Flow Summary | Cash Flow Activity (in millions) | Twenty-Six Weeks Ended August 6, 2024 | Twenty-Six Weeks Ended July 30, 2023 | | :------------------------------- | :------------------------------------ | :----------------------------------- | | Net cash from operating activities | $210.6 | $196.2 | | Net cash used in investing activities | $(228.7) | $(133.4) | | Net cash used in financing activities | $(6.1) | $(161.8) | | Decrease in cash and cash equivalents | $(24.2) | $(99.0) | | Ending cash and cash equivalents | $13.1 | $82.6 | - Net cash provided by operating activities increased to $210.6 million for the twenty-six weeks ended August 6, 2024, from $196.2 million in the prior year, driven by higher revenues and timing of working capital changes[15] - Net cash used in investing activities significantly increased to $228.7 million, primarily due to higher capital expenditures for new store openings and remodels[15] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements Note 1: Summary of Significant Accounting Policies This note outlines the company's operational context, key accounting principles, and debt fair value information - The Company operates 224 stores across 43 states, Puerto Rico, and one Canadian province as of August 6, 2024, having opened six new stores during the twenty-six weeks ended August 6, 2024[17] - The fiscal year end was changed from the Sunday after the Saturday closest to January 31 to the Tuesday after the Monday closest to January 31, effective May 6, 2024, to improve labor and operational efficiencies[18] Debt Fair Value | Debt Type | Fair Value (August 6, 2024) | Fair Value (February 4, 2024) | | :---------------------------- | :-------------------------- | :---------------------------- | | Revolving credit facility | $8.0 | $— | | Term loan | $896.6 | $898.3 | | Senior secured notes | $441.1 | $445.0 | | Total | $1,345.7 | $1,343.3 | Note 2: Accrued Liabilities This note details the composition and changes in the company's accrued liabilities, including deferred revenue and lease obligations Accrued Liabilities Breakdown | Accrued Liability (in millions) | August 6, 2024 | February 4, 2024 | | :------------------------------ | :------------- | :--------------- | | Deferred entertainment revenue | $115.5 | $121.2 | | Current portion of operating lease liabilities, net | $64.7 | $63.1 | | Compensation and benefits | $34.2 | $29.0 | | Deferred gift card revenue | $16.9 | $20.3 | | Total accrued liabilities | $307.8 | $306.0 | - Total accrued liabilities increased slightly from $306.0 million at February 4, 2024, to $307.8 million at August 6, 2024[28] Note 3: Leases This note provides information on the company's lease expenses and significant lease transactions, including sale-leasebacks Lease Expense Summary | Lease Expense (in millions) | Thirteen Weeks Ended August 6, 2024 | Thirteen Weeks Ended July 30, 2023 | Twenty-Six Weeks Ended August 6, 2024 | Twenty-Six Weeks Ended July 30, 2023 | | :-------------------------- | :---------------------------------- | :--------------------------------- | :------------------------------------ | :----------------------------------- | | Operating lease cost | $50.7 | $49.2 | $101.0 | $97.2 | | Variable lease cost | $11.9 | $8.9 | $22.8 | $19.6 | | Short-term lease cost | $1.0 | $0.9 | $1.3 | $1.6 | | Total | $63.6 | $59.0 | $125.1 | $118.4 | - In July 2024, the Company completed a sale-leaseback transaction for two store properties, generating $44.8 million in sale price. This transaction was accounted for as a failed sale-leaseback, resulting in a financing obligation liability of $44.3 million[32] Note 4: Debt This note details the company's debt structure, including credit facilities and senior secured notes, and compliance with covenants Debt Components | Debt Component (in millions) | August 6, 2024 | February 4, 2024 | | :--------------------------- | :------------- | :--------------- | | Credit facility—revolver | $8.0 | $— | | Credit facility—term loan | $893.3 | $897.8 | | Senior secured notes | $440.0 | $440.0 | | Total debt outstanding | $1,341.3 | $1,337.8 | | Long-term debt, net | $1,292.4 | $1,284.0 | - The Company's weighted average effective interest rate on total debt facilities was 9.6% for the twenty-six weeks ended August 6, 2024, down from 10.3% in the prior year period[38] - The Company was in compliance with all restrictive covenants and terms of its debt agreements as of August 6, 2024[37] Note 5: Commitments and Contingencies This note discusses potential future obligations and legal claims, assessing their likely financial impact - Management believes that the ultimate liability from legal proceedings and claims arising in the ordinary course of business will not materially affect the consolidated results of operations or financial condition[40] Note 6: Stockholders' Equity and Share-Based Compensation This note details share repurchase activities and the recognition of share-based compensation expenses - The company repurchased 1.23 million shares for $60.0 million under its $500.0 million share repurchase program, with $140.0 million remaining authorization[42] Share-based Compensation Expenses | Share-based Compensation (in millions) | Thirteen Weeks Ended August 6, 2024 | Thirteen Weeks Ended July 30, 2023 | Twenty-Six Weeks Ended August 6, 2024 | Twenty-Six Weeks Ended July 30, 2023 | | :------------------------------------- | :---------------------------------- | :--------------------------------- | :------------------------------------ | :----------------------------------- | | General and administrative expenses | $2.3 | $5.2 | $6.3 | $11.9 | - Unrecognized share-based compensation expense of $31.6 million is expected to be substantially recognized by the end of fiscal 2027[43] Note 7: Income Taxes This note explains the company's effective tax rate and factors influencing its income tax provision - The effective tax rate for the twenty-six weeks ended August 6, 2024, was 20.7%, a decrease from 22.4% in the prior year period, primarily due to higher excess tax benefits from share-based compensation and lower permanent differences[45] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key performance indicators, non-GAAP financial measures, and a detailed analysis of revenue and expense trends for both the thirteen and twenty-six-week periods ended August 6, 2024. It also discusses liquidity, capital resources, and significant accounting policies Quarterly Financial Highlights This section summarizes key financial performance metrics for the quarter, including revenue, net income, and EPS Quarterly Financial Highlights Summary | Metric (Q2 2024 vs Q2 2023) | Q2 2024 (in millions) | Q2 2023 (in millions) | Change (%) | | :-------------------------- | :-------------------- | :-------------------- | :--------- | | Revenue | $557.1 | $542.1 | +2.8% | | Net income | $40.3 | $25.9 | +55.6% | | Diluted EPS | $0.99 | $0.60 | +65.0% | | Adjusted EBITDA | $151.6 | $140.3 | +8.1% | - Comparable store sales decreased by 6.3% compared to the same calendar period in 2023[48] General Company Information This section provides an overview of the company's business model, brands, and operational footprint - Dave & Buster's Entertainment, Inc. operates high-volume entertainment and dining venues under the 'Dave & Buster's' and 'Main Event' brands, offering games, bowling, and live sports[49] - Dave & Buster's stores average 40,000 sq ft, while Main Event stores average 54,000 sq ft, appealing to a diverse customer base including adults and families[49] Key Measures of Performance This section identifies the primary metrics used by management to evaluate the company's operational and financial performance - The company monitors comparable store sales, defined as sales from stores open for a full 18 months before the current fiscal year, to assess performance[51] - New store openings are a key indicator of business expansion and brand appeal; six new stores were opened during the twenty-six weeks ended August 6, 2024[51] Non-GAAP Financial Measures This section defines and explains the company's non-GAAP financial measures used for performance assessment - The company uses non-GAAP measures like Adjusted EBITDA, Credit Adjusted EBITDA, and Store Operating Income Before Depreciation and Amortization to assess operating performance, noting their limitations as analytical tools[52] Adjusted EBITDA and Adjusted EBITDA Margin This section defines Adjusted EBITDA and its margin, used to assess core operating performance - Adjusted EBITDA is defined as net income plus interest expense, loss on debt refinancing, income taxes, depreciation and amortization, (gain) loss on property transactions, impairment, share-based compensation, currency transaction (gains) losses, and other costs[53] - Adjusted EBITDA Margin is Adjusted EBITDA divided by total revenues, providing a basis for comparing core operating performance across periods[53] Credit Adjusted EBITDA This section defines Credit Adjusted EBITDA, a non-GAAP measure used for credit facility covenant compliance - Credit Adjusted EBITDA is Adjusted EBITDA plus entertainment revenue deferrals, new project costs (including pre-opening), and other permitted adjustments, used for assessing compliance with Credit Facility covenants[54] Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin This section defines store-level operating income metrics for evaluating store productivity and efficiency - Store Operating Income Before Depreciation and Amortization is operating income plus depreciation and amortization, general and administrative expenses, and pre-opening costs, used to evaluate store-level performance[54][55] - This metric helps compare store productivity and efficiency by removing non-store-level and non-recurring costs[55] Presentation of Operating Results & Business Factors This section discusses factors influencing operating results, including fiscal year changes, seasonality, and economic conditions - The company changed its fiscal year end to the Tuesday after the Monday closest to January 31, effective May 6, 2024, adding two days to the second quarter and fiscal year 2024 to improve operational efficiencies[56] - Operating results are subject to variability due to new store openings ('honeymoon' effect), seasonal factors (higher revenues in spring/year-end holidays, lower in Q3), and potential impacts from economic conditions and inflation[57] Results of Operations (Thirteen Weeks Ended August 6, 2024 vs. July 30, 2023) This section analyzes the company's financial performance for the thirteen-week period, comparing current and prior year results Thirteen-Week Financial Performance | Metric (in millions) | Q2 2024 | Q2 2023 | Change ($) | Change (%) | | :------------------- | :------ | :------ | :--------- | :--------- | | Total revenues | $557.1 | $542.1 | $15.0 | +2.8% | | Operating income | $84.5 | $77.1 | $7.4 | +9.6% | | Net income | $40.3 | $25.9 | $14.4 | +55.6% | | Adjusted EBITDA | $151.6 | $140.3 | $11.3 | +8.1% | Revenues This section analyzes revenue trends for the thirteen-week period, detailing drivers of change and revenue mix - total revenues increased by $15.0 million (2.8%) to $557.1 million, driven by $26.9 million from new stores and $7.6 million from other revenues/deferrals, partially offset by a $19.5 million decrease in comparable store sales[66][67] - Comparable store revenues decreased by 6.3% on a calendar-adjusted basis, primarily due to reduced consumer demand compared to the prior year[69] Thirteen-Week Revenue Mix | Revenue Mix (Q2) | August 6, 2024 | July 30, 2023 | | :--------------- | :------------- | :------------ | | Entertainment | 67.5% | 66.5% | | Food | 23.0% | 23.1% | | Beverage | 9.5% | 10.4% | Cost of Products This section analyzes the cost of products for the thirteen-week period, focusing on entertainment, food, and beverage costs - Total cost of products decreased to $81.8 million (14.7% of total revenues) from $87.1 million (16.1% of total revenues) in Q2 2023[70] - Cost of entertainment as a percentage of entertainment revenues decreased to 8.8% from 9.8%, mainly due to price increases[70] - Cost of food and beverage as a percentage of food and beverage revenues decreased to 27.0% from 28.6%, attributed to menu price increases, supply chain optimization, and new menu mix[71] Operating Payroll and Benefits This section analyzes operating payroll and benefits for the thirteen-week period, highlighting changes and efficiency impacts - Operating payroll and benefits increased to $131.2 million (23.6% of total revenues) from $127.0 million (23.4% of total revenues) in Q2 2023, primarily due to employee retention tax credits recognized in the prior year, partially offset by labor management efficiencies[72] Other Store Operating Expenses This section analyzes other store operating expenses for the thirteen-week period, detailing key cost drivers and changes - Other store operating expenses increased to $167.6 million from $165.6 million, mainly due to higher occupancy and repairs & maintenance costs for new stores, partially offset by gains from asset disposals and lease terminations[73] - As a percentage of total revenues, these expenses decreased to 30.1% from 30.5%, primarily due to gains on property and equipment transactions[73] General and Administrative Expenses This section analyzes general and administrative expenses for the thirteen-week period, identifying factors influencing changes - General and administrative expenses decreased to $30.4 million (5.5% of total revenues) from $32.2 million (5.9% of total revenues) in Q2 2023, driven by lower share-based and incentive compensation, partially offset by increased consulting costs for one-time initiatives[74] Depreciation and Amortization Expense This section analyzes depreciation and amortization expense for the thirteen-week period, primarily driven by new store openings - Depreciation and amortization expense increased to $57.5 million from $49.1 million in Q2 2023, primarily due to new store openings[75] Pre-opening Costs This section analyzes pre-opening costs for the thirteen-week period, reflecting new store development activities - Pre-opening costs remained comparable at $4.1 million in Q2 2024 versus $4.0 million in Q2 2023, reflecting a similar number of stores in the development pipeline[76] Interest Expense, Net This section analyzes net interest expense for the thirteen-week period, detailing factors influencing its change - Interest expense, net, increased to $33.9 million from $32.9 million in Q2 2023, mainly due to incremental interest from sale-leaseback transactions, partially offset by lower interest rates on the Credit Facility[77] Provision for Income Taxes This section analyzes the provision for income taxes for the thirteen-week period, explaining the effective tax rate - The effective tax rate for Q2 2024 was 20.4%, down from 21.5% in Q2 2023, due to higher excess tax benefits from share-based compensation and lower permanent differences[78] Results of Operations (Twenty-Six Weeks Ended August 6, 2024 vs. July 30, 2023) This section analyzes the company's financial performance for the twenty-six-week period, comparing current and prior year results Twenty-Six Week Financial Performance | Metric (in millions) | 26 Weeks 2024 | 26 Weeks 2023 | Change ($) | Change (%) | | :------------------- | :------------ | :------------ | :--------- | :--------- | | Total revenues | $1,145.2 | $1,139.4 | $5.8 | +0.5% | | Operating income | $170.0 | $198.5 | $(28.5) | -14.4% | | Net income | $81.7 | $96.0 | $(14.3) | -14.9% | | Adjusted EBITDA | $310.7 | $322.3 | $(11.6) | -3.6% | Revenues This section analyzes revenue trends for the twenty-six-week period, detailing drivers of change and revenue mix - total revenues increased by $5.8 million (0.5%) to $1,145.2 million, driven by $55.8 million from new stores and $7.8 million from other revenues/deferrals, partially offset by a $57.8 million decrease in comparable store sales[87] - Comparable store revenues decreased by 6.0% on a calendar-adjusted basis, primarily due to reduced consumer demand[90] Twenty-Six Week Revenue Mix | Revenue Mix (26 Weeks) | August 6, 2024 | July 30, 2023 | | :--------------------- | :------------- | :------------ | | Entertainment | 66.5% | 66.2% | | Food | 23.0% | 22.9% | | Beverage | 10.5% | 10.9% | Cost of Products This section analyzes the cost of products for the twenty-six-week period, focusing on entertainment, food, and beverage costs - Total cost of products decreased to $169.1 million (14.8% of total revenues) from $181.4 million (15.9% of total revenues) in the 2023 period[91] - Cost of entertainment as a percentage of entertainment revenues decreased to 8.7% from 9.4%, primarily due to price increases[91] - Cost of food and beverage as a percentage of food and beverage revenues decreased to 26.8% from 28.8%, driven by menu price increases, supply chain optimization, and new menu mix, partially offset by promotional pricing[92] Operating Payroll and Benefits This section analyzes operating payroll and benefits for the twenty-six-week period, highlighting changes and efficiency impacts - Operating payroll and benefits increased to $272.8 million (23.8% of total revenues) from $257.6 million (22.6% of total revenues) in the 2023 period, due to additional stores and employee retention tax credits in the prior year, partially offset by labor management efficiencies[93] Other Store Operating Expenses This section analyzes other store operating expenses for the twenty-six-week period, detailing key cost drivers and changes - Other store operating expenses increased to $343.7 million from $331.6 million, primarily due to higher occupancy costs for new stores, marketing, maintenance, utilities, and supplies, partially offset by gains on asset disposals and favorable self-insurance rates[90][94] - As a percentage of total revenues, these expenses increased to 30.0% from 29.1%, mainly due to marketing, repairs, maintenance, utilities, and supplies[90] General and Administrative Expenses This section analyzes general and administrative expenses for the twenty-six-week period, identifying factors influencing changes - General and administrative expenses decreased to $61.9 million (5.4% of total revenues) from $63.6 million (5.6% of total revenues) in the 2023 period, driven by lower share-based and incentive compensation, partially offset by increased consulting costs for one-time initiatives[95] Depreciation and Amortization Expense This section analyzes depreciation and amortization expense for the twenty-six-week period, primarily due to new stores and remodels - Depreciation and amortization expense increased to $120.3 million from $98.0 million in the 2023 period, primarily due to new store openings, remodels, and accelerated depreciation for two store closures[96] Pre-opening Costs This section analyzes pre-opening costs for the twenty-six-week period, reflecting the cadence of new store openings - Pre-opening costs decreased to $7.4 million from $8.7 million in the 2023 period, related to the cadence of new store openings[97] Interest Expense, Net This section analyzes net interest expense for the twenty-six-week period, detailing factors influencing its change - Interest expense, net, increased to $67.0 million from $63.6 million in the 2023 period, primarily due to decreased interest income and incremental interest from sale-leaseback transactions, partially offset by lower interest rates on the Credit Facility[98] Provision for Income Taxes This section analyzes the provision for income taxes for the twenty-six-week period, explaining the effective tax rate - The effective tax rate for the twenty-six weeks ended August 6, 2024, was 20.7%, down from 22.4% in the 2023 period, due to higher excess tax benefits from share-based compensation and lower permanent differences[99] Liquidity and Capital Resources This section assesses the company's ability to meet short-term and long-term obligations, including cash flows and debt facilities - The company believes its cash and cash equivalents, expected cash flows from operations, and available borrowings under its revolving credit facility are sufficient to finance operating requirements and capital allocation strategy for at least the next twelve months[112] Credit Facilities and Senior Secured Notes This section details the company's credit facilities and senior secured notes, including outstanding balances and maturity plans - As of August 6, 2024, the company had $11.0 million in outstanding letters of credit and an unused commitment balance of $481.0 million under its revolving credit facility[101] - The 7.625% Senior Secured Notes mature on November 1, 2025, and the company intends to extend their maturity by amending the Credit Facility or issuing new notes[102] Sale-Leaseback Transactions This section describes recent sale-leaseback transactions and their accounting treatment as financing obligations - In July 2024, the company sold two store properties for $44.8 million in a failed sale-leaseback transaction, resulting in a $44.3 million financing obligation liability of[103] - Monthly rent payments for these assets will be recorded as interest expense and a reduction of the outstanding liability, rather than rent expense[103] Interest Expense This section provides a detailed breakdown of interest expense from debt and sale-leaseback transactions Interest Expense, Net Breakdown | Interest Expense, Net (in millions) | Thirteen Weeks Ended August 6, 2024 | Thirteen Weeks Ended July 30, 2023 | Twenty-Six Weeks Ended August 6, 2024 | Twenty-Six Weeks Ended July 30, 2023 | | :---------------------------------- | :---------------------------------- | :--------------------------------- | :------------------------------------ | :----------------------------------- | | Interest expense on debt | $30.2 | $30.6 | $59.8 | $60.7 | | Interest expense on sale-leasebacks | $1.5 | $— | $2.9 | $— | | Total interest expense, net | $33.9 | $32.9 | $67.0 | $63.6 | Credit Adjusted EBITDA and Net Total Leverage Ratio This section presents Credit Adjusted EBITDA and the Net Total Leverage Ratio, key metrics for debt covenant compliance Credit Adjusted EBITDA Calculation | Metric (Trailing Four Quarters Ended August 6, 2024) | Amount (in millions) | | :--------------------------------------------------- | :------------------- | | Net income | $112.6 | | EBITDA | $508.9 | | Credit Adjusted EBITDA | $561.1 | Net Total Leverage Ratio Calculation | Net Total Leverage Ratio (As of August 6, 2024) | Amount (in millions) | | :---------------------------------------------- | :------------------- | | Credit Adjusted EBITDA (a) | $561.1 | | Net debt (b) | $1,299.3 | | Net Total Leverage Ratio (b / a) | 2.3x | - The company's Net Total Leverage Ratio of 2.3x is below the maximum permitted ratio of 3.5x as defined in its Credit Facility[110] Dividends and Share Repurchases This section reports on the company's share repurchase activities and dividend policy - During the twenty-six weeks ended August 6, 2024, the company repurchased 1.23 million shares for $60.0 million, with $140.0 million remaining under the $500.0 million share repurchase program[111] - No dividends were declared or paid during the 2024 period[111] Cash and Cash Equivalents This section details the company's cash position and its ability to manage working capital deficits - As of August 6, 2024, cash and cash equivalents totaled $13.1 million[112] - The company can operate with a working capital deficit due to quick cash receipts from sales relative to liability payments[112] Cash Flow Activity This section summarizes cash flows from operating, investing, and financing activities, highlighting key drivers - Operating cash flow increased to $210.6 million for the 2024 period from $196.2 million in the prior year, driven by higher revenues and timing of working capital changes[113] - Investing activities used $228.7 million, up from $133.4 million, primarily due to increased capital expenditures for store remodels and new store openings[114] - Financing activities used $6.1 million, mainly due to share repurchases, partially offset by sale-leaseback proceeds and net debt proceeds[114] Contractual Obligations and Commitments This section confirms the status of the company's contractual obligations and commitments - There have been no material changes to the company's contractual obligations since the Form 10-K for the year ended February 4, 2024[115] Accounting Policies and Estimates This section highlights the critical accounting policies and estimates that require management judgment - The preparation of financial statements requires management to make estimates and judgments that affect reported amounts, which are subject to change based on future events[116] Recent Accounting Pronouncements This section discusses the impact of recently issued accounting pronouncements on the financial statements - The company reviewed recent accounting pronouncements effective for fiscal year 2024 and determined they were either not applicable or did not have a material impact on the consolidated financial statements[117] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to various market risks, including commodity price fluctuations, interest rate changes, and inflation, and discusses their potential impact on financial condition and results of operations Commodity Price Risk This section details the company's exposure to market price fluctuations in food, beverage, supplies, and energy costs - The company is exposed to market price fluctuations in food, beverage, supplies, and energy costs, which can materially impact food costs, especially for proteins, seafood, produce, dairy, and cooking oil[118] - Fluctuations in commodity prices, tariffs, and trade regulations, if not offset by price increases, could adversely affect results of operations[118] Interest Rate Risk This section discusses the company's exposure to variable interest rates on its credit facilities and potential financial impact - The company's Credit Facility is based on variable interest rates, with $8.0 million outstanding on its revolving facility and $893.3 million on its term loan facility as of August 6, 2024[119] - A hypothetical one percentage point interest rate change on the outstanding credit facility balance would impact annual results of operations by approximately $9.0 million[119] Inflation This section addresses the potential adverse impact of severe inflation on the company's business and financial performance - Severe increases in inflation could adversely impact the business, financial condition, and results of operations, especially if multiple costs (e.g., commodity prices, labor) rise simultaneously beyond the company's ability to offset with price adjustments without negatively impacting demand[120] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on changes in internal control over financial reporting, particularly regarding the implementation of a new ERP system Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of the reporting period end - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[121] Changes in Internal Control Over Financial Reporting This section reports on material changes to internal controls, specifically due to the implementation of a new ERP system - During Q2 2024, the company substantially completed the implementation of a new enterprise resource planning (ERP) system, including financial management, inventory, payroll, and human capital management systems[123] - This ERP implementation resulted in material changes to internal controls, which have been updated to reflect changes to financial reporting business processes[123] - No other material changes to internal control over financial reporting occurred during the second quarter ended August 6, 2024[123] PART II – OTHER INFORMATION This section includes legal proceedings, risk factors, equity security sales, exhibits, and official signatures Item 1. Legal Proceedings This section refers to Note 5 of the Consolidated Financial Statements for information regarding legal proceedings, indicating no material changes or new significant details in this part of the report - Information regarding legal proceedings is incorporated by reference from Note 5 to the Consolidated Financial Statements[125] Item 1A. Risk Factors This section directs readers to the company's Annual Report on Form 10-K for a comprehensive discussion of risk factors, implying no new material risk factors have emerged or changed significantly in the current quarter - Discussion of risk factors is incorporated by reference from Item 1A of the Company's Annual Report on Form 10-K for the year ended February 4, 2024[126] Item 2. Unregistered Sales of Equity Securities This section provides details on the company's common stock repurchases during the twenty-six weeks ended August 6, 2024, under its publicly announced share repurchase program Common Stock Repurchase Activity | Period | Total Shares Repurchased (millions) | Average Price per Share | Approximate Dollar Value Remaining (millions) | | :---------------------------- | :---------------------------------- | :---------------------- | :-------------------------------------------- | | February 5, 2024 to March 3, 2024 | — | $— | $200.0 | | March 4, 2024 to April 7, 2024 | — | $— | $200.0 | | April 8, 2024 to May 5, 2024 | 0.18 | $52.97 | $190.2 | | May 6, 2024 to June 4, 2024 | 0.65 | $51.24 | $156.8 | | June 5, 2024 to July 9, 2024 | 0.29 | $44.27 | $144.0 | | July 10, 2024 to August 6, 2024 | 0.10 | $38.55 | $140.0 | - The company repurchased a cumulative 1.23 million shares during the twenty-six weeks ended August 6, 2024, under its share repurchase program[127] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including employment agreements, certifications from the CEO and CFO, and Inline XBRL documents - Key exhibits include the employment agreement for Darin Harper (CFO), certifications from the CEO and CFO (Christopher Morris and Darin Harper) under 17 CFR 240.13a-14(a) and 18 U.S.C. Section 1350, and various Inline XBRL documents[129] Signatures This section contains the official signatures of the company's Chief Executive Officer and Chief Financial Officer, certifying the filing of the report - The report was signed on September 10, 2024, by Christopher Morris (Chief Executive Officer) and Darin Harper (Chief Financial Officer) on behalf of Dave & Buster's Entertainment, Inc.[130]