Dave & Buster's Entertainment, Inc.: Form 10-Q for the period ended Oct 29, 2023
Filed with the SEC on Dec 5, 2023 and accepted by EDGAR at Dec 5, 2023, 16:21 ET.
Management's discussion and analysis
As filed, 55,362 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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 28, 2023. Amounts included in the following discussion, except for operating weeks and per share amounts, are rounded in millions.
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 28, 2023. 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, such results or developments may not be indicative of results or developments in subsequent periods.
Quarterly Financial Highlights
- Third quarter revenue of $466.9 million decreased 3.0% from the third quarter of 2022.
- Pro forma combined comparable store sales (including Main Event branded stores) decreased 7.8% compared with the same period in 2022 and increased 8.1% compared with the same period in 2019.
- Net loss totaled $5.2 million, or $(0.12) per diluted share, compared with net income of $1.9 million, or $0.04 per diluted share in the third quarter of 2022.
- Adjusted EBITDA of $81.6 million, or 17.5% of revenue, in the quarter decreased 5.2% from the third quarter of 2022.
- The Company ended the third quarter with $554.2 million of liquidity, which included $64.0 million in cash and $490.2 million available under its $500 million revolving credit facility.
- The Company opened two new Dave & Buster's stores and one new Main Event store in the third quarter.
- The Company repurchased 2.8 million shares at a total cost of $100.0 million in the third quarter. Total share repurchases to date in fiscal 2023 are 8.5 million shares totaling $300.0 million and representing 17.5% of the Company's outstanding shares as of the end of fiscal 2022. The Company has $100.0 million remaining on its share repurchase authorization. See Note 8 to the consolidated financial statements for further discussion of share repurchases.
- The Company entered into a sale leaseback transaction with an institutional real estate investor for the real estate of four Dave & Buster's stores generating $85.8 million in proceeds. See Note 5 to the consolidated financial statements for further discussion of the transaction.
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 “Dave & Buster’s” and “Main Event” brands. The core of our concept is to offer our customers quality dining and various forms of entertainment all in one location. Our entertainment offerings provide an extensive assortment of attractions centered around playing games, bowling, and watching live sports and other televised events. Our brands appeal to a relatively balanced mix of male and female adults, as well as families and young adults. We believe we appeal to a diverse customer base by providing a highly customizable experience in a dynamic and fun setting.
Our Dave & Buster’s stores average 40,000 square feet and range in size between 16,000 and 70,000 square feet. Our Main Event stores average 54,000 square feet and range in size between 37,500 and 78,000 square feet. Generally, our stores are open seven days a week, with normal hours of operation generally from between 10:00 to 11:30 a.m. until midnight, with stores typically open for extended hours on weekends.
Key Measures of Our Performance
We monitor and analyze several key performance measures to manage our business and evaluate financial and operating performance, including:
Comparable store sales. Comparable store sales are a comparison of sales to the same period of prior years for the comparable store base. We historically define the comparable store base to include those stores open for a full 18 months before the beginning of the fiscal year and excluding stores permanently closed during the period. For fiscal 2023, our comparable store base consists of 141 Dave & Buster's branded stores. Our Main Event branded stores are not included in comparable store sales for the thirteen and thirty-nine weeks ended October 29, 2023.
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. For the thirty-nine weeks ended October 29, 2023, we opened ten new stores (five Dave & Buster's branded stores and five Main Event branded 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, Credit Adjusted EBITDA, 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 titled measures reported by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Although we use these non-GAAP measures to assess the operating performance of our business, they have significant limitations as an analytical tool because they exclude certain material costs. For example, Adjusted EBITDA does not take into account a number of significant items, including our interest expense and depreciation and amortization expense. In addition, Adjusted EBITDA excludes certain other costs 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 do not directly relate to the ongoing operations of the currently underlying business of our stores and therefore complicate comparison of the underlying business between periods. Nevertheless, because of the limitations described above, management does not view Adjusted EBITDA, Adjusted EBITDA Margin, Credit Adjusted EBITDA, Store Operating Income Before Depreciation and Amortization or Store Operating Income Before Depreciation and Amortization Margin 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 refinancing, provision for (benefit from) income taxes, depreciation and amortization expense, loss on asset disposal, impairment of long-lived assets, share-based compensation, 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.
Credit Adjusted EBITDA
We define “Credit Adjusted EBITDA” as Adjusted EBITDA plus certain other items as defined in our Credit Facility (see Liquidity and Capital Resources below). Other adjustments include (i) entertainment revenue deferrals, (ii) the cost of new projects, including store pre-opening costs, and (iii) other costs and adjustments as permitted by the debt agreements. We believe the presentation of Credit Adjusted EBITDA is appropriate as it provides additional information to investors about the calculation of, and compliance with, certain financial covenants in the Credit Facility.
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.
We believe that Store Operating Income Before Depreciation and Amortization is another useful measure in evaluating our operating performance because it removes the impact of general and administrative expenses, which are not incurred at the store level, and the costs of opening new stores, which are non-recurring at the store level, and thereby enables the comparability of the operating performance of our stores for the periods presented. We also believe that Store Operating Income Before Depreciation and Amortization is a useful measure in evaluating our operating performance within the entertainment and dining industry because it permits the evaluation of store-level productivity, efficiency, and performance, and we use Store Operating Income Before Depreciation and Amortization as a means of evaluating store financial performance compared with our competitors. However, because this measure excludes significant items such as general and administrative expenses and pre-opening costs, as well as our interest expense, net, loss on debt refinancing and depreciation and amortization expense, which are important in evaluating our consolidated financial performance from period to period, the value of this measure is limited as a measure of our consolidated financial performance.
Presentation of Operating Results
We operate on a 52-week 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 third quarter of 2023 relate to the 13-week period ended October 29, 2023. All references to the third quarter of 2022 relate to the 13-week period ended October 30, 2022. Fiscal 2023 consists of 53 weeks and fiscal 2022 consists of 52 weeks. All dollar amounts are presented in millions, unless otherwise noted, except per share amounts.
Store-Level Variability, Quarterly Fluctuations, Seasonality and Inflation
We operate stores varying in size and have experienced significant variability among stores in volumes, operating results and net investment costs.
Our new stores typically open with sales volumes in excess of their expected long-term run-rate levels, which we refer to as a “honeymoon” effect. We traditionally expect our new store sales volumes in year two to be 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 will result in significant fluctuations in quarterly results.
New store operating margins (excluding pre-opening expenses) during the first year of operation historically benefit from honeymoon sales leverage on occupancy, management labor and other fixed costs. This benefit is partially offset by normal inefficiencies in hourly labor and other costs associated with establishing a new store. In year two, operating margins may decline due to the loss of honeymoon sales leverage on fixed costs which is partially offset by improvements in store operating efficiency.
Our operating results historically have fluctuated due to seasonal factors. Typically, we have higher revenues associated with the 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 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. There is no assurance that our cost of products will remain stable or that federal, state, or local minimum wage rates will not increase beyond amounts currently legislated, however, the effects of any supplier price increase or wage rate increases might be partially offset by selective price increases if competitively appropriate.
Thirteen Weeks Ended October 29, 2023 Compared to the Thirteen Weeks Ended October 30, 2022
Results of operations. The following table sets forth selected data, in millions of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying unaudited consolidated statement of comprehensive income (loss).
| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | |||
|---|---|---|---|---|
| Entertainment revenues | $302.0 | 64.7% | $315.3 | 65.5% |
| Food and beverage revenues | 164.9 | 35.3% | 165.9 | 34.5% |
| Total revenues | 466.9 | 100.0% | 481.2 | 100.0% |
| Cost of entertainment (% of entertainment revenues) | 29.5 | 9.8% | 27.2 | 8.6% |
| Cost of food and beverage (% of food and beverage revenues) | 43.3 | 26.3% | 49.0 | 29.5% |
| Total cost of products | 72.8 | 15.6% | 76.2 | 15.8% |
| Operating payroll and benefits | 119.9 | 25.7% | 126.0 | 26.2% |
| Other store operating expenses | 171.3 | 36.7% | 163.8 | 34.0% |
| General and administrative expenses | 28.4 | 6.1% | 32.8 | 6.8% |
| Depreciation and amortization expenses | 51.9 | 11.1% | 48.4 | 10.1% |
| Pre-opening costs | 4.0 | 0.9% | 3.9 | 0.8% |
| Total operating costs | 448.3 | 96.0% | 451.1 | 93.7% |
| Operating income | 18.6 | 4.0% | 30.1 | 6.3% |
| Interest expense, net | 28.9 | 6.2% | 28.4 | 5.9% |
| Income (loss) before provision for income taxes | (10.3) | (2.2)% | 1.7 | 0.4% |
| Benefit from income taxes | (5.1) | (1.1)% | (0.2) | —% |
| Net income (loss) | $(5.2) | (1.1)% | $1.9 | 0.4% |
| Company-owned stores at end of period | 214 | 200 |
Reconciliations of Non-GAAP Financial Measures
Adjusted EBITDA
The following table reconciles (in millions of dollars and as a percent of total revenues) Net income to Adjusted EBITDA for the periods indicated:
| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | |||
|---|---|---|---|---|
| Net income (loss) | $(5.2) | (1.1)% | $1.9 | 0.4% |
| Interest expense, net | 28.9 | 28.4 | ||
| Provision for income taxes | (5.1) | (0.2) | ||
| Depreciation and amortization expense | 51.9 | 48.4 | ||
| EBITDA | 70.5 | 15.1% | 78.5 | 16.3% |
| Loss on asset disposal | 0.9 | 0.2 | ||
| Share-based compensation (1) | 3.5 | 3.2 | ||
| Transaction and integration costs (2) | 1.7 | 4.0 | ||
| System implementation costs (3) | 3.0 | — | ||
| Consulting costs (4) | 2.0 | — | ||
| Other items, net | — | 0.2 | ||
| Adjusted EBITDA | $81.6 | 17.5% | $86.1 | 17.9% |
(1) Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(2) Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(3) System implementation costs represent expenses incurred related to the development of new enterprise resource planning, human capital management and inventory software for our stores and store support teams. These charges are primarily recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(4) Represents one-time, third-party consulting fees that are not part of our ongoing operations and were incurred to execute two related, discrete, and project-based strategic initiatives aimed at transforming our marketing strategy, which are included in general and administrative expenses on the consolidated statement of comprehensive income (loss). The transformative nature, narrow scope, and limited duration of these incremental consulting fees are not reflective of the ordinary course expenses incurred to operate our business.
Store Operating Income Before Depreciation and Amortization
The following table reconciles (in millions of dollars and as a percent of total revenues) Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:
| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | |||
|---|---|---|---|---|
| Operating income | $18.6 | 4.0% | $30.1 | 6.3% |
| General and administrative expenses | 28.4 | 32.8 | ||
| Depreciation and amortization expense | 51.9 | 48.4 | ||
| Pre-opening costs | 4.0 | 3.9 | ||
| Store Operating Income Before Depreciation and Amortization | $102.9 | 22.0% | $115.2 | 23.9% |
22
Capital Additions
The table below reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives (“Payments from landlords”).
| Thirteen Weeks Ended October 29, 2023 | Thirteen Weeks Ended October 30, 2022 | |
|---|---|---|
| New store and operating initiatives | $51.7 | $44.5 |
| Games | 5.4 | 2.9 |
| Maintenance | 16.2 | 9.5 |
| Total capital additions | $73.3 | $56.9 |
| Payments from landlords | $5.9 | $20.6 |
Results of Operations
Revenues
Selected revenue and store data (in millions except for store operating weeks) for the periods indicated are as follows:
| Thirteen Weeks Ended October 29, 2023 | October 30, 2022 | Change | |
|---|---|---|---|
| Total revenues | $466.9 | $481.2 | $(14.3) |
| Total store operating weeks | 2,774 | 2,616 | 158 |
| Comparable store revenues | $323.9 | $350.9 | $(27.0) |
| Comparable store operating weeks | 1,833 | 1,833 | — |
| Noncomparable store revenues—Dave & Buster’s | $35.9 | $23.9 | $12.0 |
| Noncomparable store operating weeks—Dave & Buster’s | 188 | 107 | 81 |
| Noncomparable store revenues—Main Event | $107.9 | 106.8 | $1.1 |
| Noncomparable store operating weeks—Main Event | 753 | 676 | 77 |
| Other revenues and deferrals | $(0.8) | $(0.4) | $(0.4) |
Revenue mix by category, as a percentage of total revenues, for the periods indicated was as follows:
| Thirteen Weeks Ended October 29, 2023 | October 30, 2022 | |
|---|---|---|
| Entertainment revenues | 64.7% | 65.5% |
| Food revenues | 23.5% | 23.5% |
| Beverage revenues | 11.8% | 11.0% |
Total revenues decreased $14.3 million, or 3.0%, to $466.9 million in the third quarter of 2023 compared to $481.2 million in the third quarter of 2022. The decrease is attributable to a 7.7% decline in comparable store revenue, partially offset by incremental revenue from new, noncomparable, Dave & Buster's stores. The decline in comparable store revenue is due primarily to a reduction in walk-in transaction counts relative to the robust consumer environment of the prior year period, partially offset by increases in food and beverage prices and increases in special event bookings.
Comparable entertainment revenues in the third quarter of 2023 decreased by $20.4 million, or 9.0%, to $205.7 million from $226.1 million in the third quarter of 2022. Food sales at comparable stores decreased by $7.3 million, or 8.6%, to $77.9 million in the third quarter of 2023 from $85.2 million in the third quarter of 2022. Beverage sales at comparable stores increased by $0.7 million, or 1.8%, to $40.3 million in the third quarter of 2023 from $39.6 million in the third quarter of 2022.
Cost of products
The total cost of products was $72.8 million for the third quarter of 2023 compared to $76.2 million for the third quarter of 2022. The total cost of products as a percentage of total revenues decreased to 15.6% for the third quarter of 2023 compared to 15.8% for the third quarter of 2022.
Cost of entertainment was $29.5 million in the third quarter of 2023 compared to $27.2 million in the third quarter of 2022. The cost of entertainment, as a percentage of entertainment revenues, increased to 9.8% for the third quarter of 2023 from 8.6% in the third quarter of 2022.
Cost of food and beverage products was $43.3 million for the third quarter of 2023 compared to $49.0 million for the third quarter of 2022. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased to 26.3% for the third quarter of 2023 from 29.5% for the third quarter of 2022. The decrease was primarily attributable to food and beverage menu price increases, continued supply chain and ingredient optimization, and the mix of products sold with our new menu.
Operating payroll and benefits
Total operating payroll and benefits was $119.9 million in the third quarter of 2023 compared to $126.0 million in the third quarter of 2022. The total cost of operating payroll and benefits as a percentage of total revenues was 25.7% in the third quarter of 2023 compared to 26.2% in the third quarter of 2022. This decrease is primarily due to labor management efficiencies and lower incentive compensation, partially offset by hourly wage rate and manager salary increases.
Other store operating expenses
Other store operating expenses was $171.3 million in the third quarter of 2023 compared to $163.8 million in the third quarter of 2022. The increase is primarily due to higher occupancy costs for new stores and marketing costs. Other store operating expense as a percentage of total revenues increased to 36.7% in the third quarter of 2023 compared to 34.0% in the third quarter of 2022. This increase in expense as a percentage of total revenues was due primarily to increased occupancy costs, repairs & maintenance, and marketing costs.
General and administrative expenses
General and administrative expenses decreased to $28.4 million in the third quarter of 2023 compared to $32.8 million in the third quarter of 2022. The decrease in general and administrative expenses was driven primarily by lower merger & integration costs related to the Main Event acquisition and lower incentive compensation, partially offset by higher system implementation and consulting costs. General and administrative expenses as a percentage of total revenues decreased to 6.1% in the third quarter of 2023 compared to 6.8% in the third quarter of 2022 for the same reasons.
Depreciation and amortization expense
Depreciation and amortization expense increased to $51.9 million in the third quarter of 2023 compared to $48.4 million in the third quarter of 2022, primarily due to new store openings.
Pre-opening costs
Pre-opening costs increased to $4.0 million in the third quarter of 2023 compared to $3.9 million in the third quarter of 2022 primarily due to the timing of Dave & Buster's and Main Event store openings in 2023.
Interest expense, net
Interest expense, net increased to $28.9 million in the third quarter of 2023 compared to $28.4 million in the third quarter of 2022 due primarily to an increase in average outstanding debt. See further discussion of the Company's debt activity at Note 6 to the consolidated financial statements.
Provision for income taxes
The effective tax rate for the third quarter of 2023 was 49.5%, compared to (11.8)% for the third quarter of 2022. The third quarter of 2023 includes favorable state apportionment impacts resulting from the acquisition of Main Event and legal entity restructuring, favorable impacts from lower permanent differences, primarily non-deductible transaction costs, and favorable impacts from credits associated with the reversal of certain tax valuation allowances.
Thirty-Nine Weeks Ended October 29, 2023 Compared to the Thirty-Nine Weeks Ended October 30, 2022
Results of operations. The following table sets forth selected data, in millions of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying unaudited consolidated statement of comprehensive income (loss).
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | |||
|---|---|---|---|---|
| Entertainment revenues | $1,055.9 | 65.7% | $925.9 | 66.1% |
| Food and beverage revenues | 550.4 | 34.3% | 474.8 | 33.9% |
| Total revenues | 1,606.3 | 100.0% | 1,400.7 | 100.0% |
| Cost of entertainment (% of entertainment revenues) | 98.2 | 9.3% | 83.1 | 9.0% |
| Cost of food and beverage (% of food and beverage revenues) | 148.5 | 27.0% | 138.7 | 29.2% |
| Total cost of products | 246.7 | 15.4% | 221.8 | 15.8% |
| Operating payroll and benefits | 377.5 | 23.5% | 333.0 | 23.8% |
| Other store operating expenses | 510.4 | 31.8% | 430.7 | 30.7% |
| General and administrative expenses | 92.0 | 5.7% | 98.8 | 7.1% |
| Depreciation and amortization expenses | 149.9 | 9.3% | 120.3 | 8.6% |
| Pre-opening costs | 12.7 | 0.8% | 10.8 | 0.8% |
| Total operating costs | 1,389.2 | 86.5% | 1,215.4 | 86.8% |
| Operating income | 217.1 | 13.5% | 185.3 | 13.2% |
| Interest expense, net | 92.5 | 5.8% | 56.9 | 4.1% |
| Loss on debt refinancing | 11.2 | 0.7% | 1.5 | 0.1% |
| Income before provision for income taxes | 113.4 | 7.1% | 126.9 | 9.1% |
| Provision for income taxes | 22.6 | 1.4% | 28.9 | 2.1% |
| Net income | $90.8 | 5.7% | $98.0 | 7.0% |
| Company-owned stores at end of period | 214 | 200 |
25
Reconciliations of Non-GAAP Financial Measures
Adjusted EBITDA
The following table reconciles (in millions of dollars and as a percent of total revenues) Net income to Adjusted EBITDA for the periods indicated:
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | |||
|---|---|---|---|---|
| Net income | $90.8 | 5.7% | $98.0 | 7.0% |
| Interest expense, net | 92.5 | 56.9 | ||
| Loss on debt refinancing | 11.2 | 1.5 | ||
| Provision for income taxes | 22.6 | 28.9 | ||
| Depreciation and amortization expense | 149.9 | 120.3 | ||
| EBITDA | 367.0 | 22.8% | 305.6 | 21.8% |
| Loss on asset disposal | 1.6 | 0.6 | ||
| Impairment of long-lived assets (1) | 1.7 | 1.8 | ||
| Share-based compensation (2) | 15.4 | 11.5 | ||
| Transaction and integration costs (3) | 9.6 | 22.3 | ||
| System implementation costs (4) | 6.2 | — | ||
| Consulting costs (5) | 2.0 | — | ||
| Other items, net | 0.4 | 0.2 | ||
| Adjusted EBITDA | $403.9 | 25.1% | $342.0 | 24.4% |
(1) Amount for the thirty-nine weeks ended October 29, 2023 included property and equipment that was removed from service and recorded in other store operating expenses on the consolidated statement of comprehensive income (loss). Amount for the thirty-nine weeks ended October 30, 2022 related to Main Event’s corporate headquarters lease, which was abandoned, and was included in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(2) Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(3) Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(4) System implementation costs represent expenses incurred related to the development of new enterprise resource planning, human capital management and inventory software for our stores and store support teams. These charges are primarily recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(5) Represents one-time, third-party consulting fees that are not part of our ongoing operations and were incurred to execute two related, discrete, and project-based strategic initiatives aimed at transforming our marketing strategy, which are included in general and administrative expenses on the consolidated statement of comprehensive income (loss). The transformative nature, narrow scope, and limited duration of these incremental consulting fees are not reflective of the ordinary course expenses incurred to operate our business.
Store Operating Income Before Depreciation and Amortization
The following table reconciles (in millions of dollars and as a percent of total revenues) Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | |||
|---|---|---|---|---|
| Operating income | $217.1 | 13.5% | $185.3 | 13.2% |
| General and administrative expenses | 92.0 | 98.8 | ||
| Depreciation and amortization expense | 149.9 | 120.3 | ||
| Pre-opening costs | 12.7 | 10.8 | ||
| Store Operating Income Before Depreciation and Amortization | $471.7 | 29.4% | $415.2 | 29.6% |
26
Capital Additions
The table below reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives (“Payments from landlords”).
| Thirty-Nine Weeks Ended October 29, 2023 | Thirty-Nine Weeks Ended October 30, 2022 | |
|---|---|---|
| New store and operating initiatives | $156.2 | $116.7 |
| Games | 13.5 | 22.2 |
| Maintenance | 45.8 | 23.0 |
| Total capital additions | $215.5 | $161.9 |
| Payments from landlords | $13.1 | $28.6 |
Results of Operations
Revenues
Selected revenue and store data (in millions except for store operating weeks) for the periods indicated are as follows:
| Thirty-Nine Weeks Ended October 29, 2023 | October 30, 2022 | Change | |
|---|---|---|---|
| Total revenues | $1,606.3 | $1,400.7 | $205.6 |
| Total store operating weeks | 8,192 | 6,663 | 1,529 |
| Comparable store revenues | $1,121.9 | $1,195.4 | $(73.5) |
| Comparable store operating weeks | 5,499 | 5,499 | — |
| Noncomparable store revenues—Dave & Buster’s | $107.8 | $55.7 | $52.1 |
| Noncomparable store operating weeks—Dave & Buster’s | 497 | 228 | 269 |
| Noncomparable store revenues—Main Event | 379.9 | 158.2 | 221.7 |
| Noncomparable store operating weeks—Main Event | 2,196 | 936 | 1,260 |
| Other revenues and deferrals | $(3.3) | $(8.6) | $5.3 |
Revenue mix by category, as a percentage of total revenues, for the periods indicated was as follows:
| Thirty-Nine Weeks Ended October 29, 2023 | October 30, 2022 | |
|---|---|---|
| Entertainment revenues | 65.7% | 66.1% |
| Food revenues | 23.1% | 23.1% |
| Beverage revenues | 11.2% | 10.8% |
Total revenues increased $205.6 million, or 14.7%, to $1,606.3 in the thirty-nine weeks ended October 29, 2023 compared to $1,400.7 million in the thirty-nine weeks ended October 30, 2022. The increase in revenue is primarily attributable to $221.7 million of increased revenue from our Main Event stores, which were acquired on June 29, 2022, and $52.1 million in revenue from new, noncomparable, Dave & Buster's stores, partially offset by a 6.1% decrease in comparable store sales. The decrease in comparable store revenue is due primarily to a reduction in walk-in transaction counts relative to the robust consumer environment of the prior year period, partially offset by increases in food and beverage prices and increases in special event bookings.
Comparable entertainment revenues in the thirty-nine weeks ended October 29, 2023 decreased by $62.8 million, or 8.0%, to $724.2 million from $787.0 million in the thirty-nine weeks ended October 30, 2022. Food sales at comparable stores decreased by $13.2 million, or 4.7%, to $265.2 million in the thirty-nine weeks ended October 29, 2023 from $278.4 million in the thirty-nine weeks ended October 30, 2022. Beverage sales at comparable stores increased by $2.5 million, or
1.9%, to $132.5 million in the thirty-nine weeks ended October 29, 2023 from $130.0 million in the thirty-nine weeks ended October 30, 2022.
Cost of products
The total cost of products was $246.7 million for the thirty-nine weeks ended October 29, 2023 and $221.8 million for the thirty-nine weeks ended October 30, 2022. The total cost of products as a percentage of total revenues decreased to 15.4% for the thirty-nine weeks ended October 29, 2023 compared to 15.8% for the thirty-nine weeks ended October 30, 2022.
Cost of entertainment increased to $98.2 million in the thirty-nine weeks ended October 29, 2023 compared to $83.1 million in the thirty-nine weeks ended October 30, 2022. The cost of entertainment, as a percentage of entertainment revenues, increased to 9.3% for the thirty-nine weeks ended October 29, 2023 from 9.0% in the thirty-nine weeks ended October 30, 2022.
Cost of food and beverage products increased to $148.5 million for the thirty-nine weeks ended October 29, 2023 compared to $138.7 million for the thirty-nine weeks ended October 30, 2022. Cost of food and beverage products, as a percentage of food and beverage revenues, decreased to 27.0% for the thirty-nine weeks ended October 29, 2023 from 29.2% for the thirty-nine weeks ended October 30, 2022. The decrease was primarily attributable to food and beverage menu price increases, continued supply chain and ingredient optimization, and the mix of products sold with our new menu.
Operating payroll and benefits
Total operating payroll and benefits increased to $377.5 million in the thirty-nine weeks ended October 29, 2023 compared to $333.0 million in the thirty-nine weeks ended October 30, 2022. The total cost of operating payroll and benefits as a percentage of total revenues was 23.5% in the thirty-nine weeks ended October 29, 2023 compared to 23.8% in the thirty-nine weeks ended October 30, 2022. This decrease is primarily due to labor management efficiencies and lower incentive compensation, partially offset by hourly wage rate and manager salary increases.
Other store operating expenses
Other store operating expenses increased to $510.4 million in the thirty-nine weeks ended October 29, 2023 compared to $430.7 million in the thirty-nine weeks ended October 30, 2022. The increase is primarily due to the additional store operating hours related to our Main Event stores, the impact of Dave & Buster’s new store openings, as well as higher occupancy costs, maintenance, security, cleaning services and marketing costs. Other store operating expense as a percentage of total revenues increased to 31.8% in the thirty-nine weeks ended October 29, 2023 compared to 30.7% in the thirty-nine weeks ended October 30, 2022. This increase in expense as a percentage of total revenues was primarily due to increased occupancy and marketing costs.
General and administrative expenses
General and administrative expenses decreased to $92.0 million in the thirty-nine weeks ended October 29, 2023 compared to $98.8 million in the thirty-nine weeks ended October 30, 2022. The decrease in general and administrative expenses was driven primarily by $22.3 million of transaction and integration costs during the prior year period and lower incentive compensation in the current year, partially offset by higher stock based compensation expense, system implementation and consulting costs. General and administrative expenses as a percentage of total revenues decreased to 5.7% in the thirty-nine weeks ended October 29, 2023 compared to 7.1% in the thirty-nine weeks ended October 30, 2022 due primarily to the reasons noted above.
Depreciation and amortization expense
Depreciation and amortization expense increased to $149.9 million in the thirty-nine weeks ended October 29, 2023 compared to $120.3 million in the thirty-nine weeks ended October 30, 2022, primarily due to the acquired Main Event stores.
Pre-opening costs
Pre-opening costs increased to $12.7 million in the thirty-nine weeks ended October 29, 2023 compared to $10.8 million in the thirty-nine weeks ended October 30, 2022 primarily related to growth in the pipeline of new store openings in the thirty-nine weeks ended October 29, 2023 compared to the thirty-nine weeks ended October 30, 2022.
Interest expense, net
Interest expense, net increased to $92.5 million in the thirty-nine weeks ended October 29, 2023 compared to $56.9 million in the thirty-nine weeks ended October 30, 2022 due primarily to an increase in average outstanding debt. See further discussion of the Company's debt activity at Note 6 to the consolidated financial statements.
Loss on debt refinancing
Loss on debt refinancing was $11.2 million in the thirty-nine weeks ended October 29, 2023 and $1.5 million in the thirty-nine weeks ended October 30, 2022. These amounts are related to the debt refinancing in June 2023 and June 2022, respectively. See further discussion of the Company's debt activity at Note 6 to the consolidated financial statements.
Provision for income taxes
The effective tax rate for the thirty-nine weeks ended October 29, 2023 was 19.9%, compared to 22.9% for the thirty-nine weeks ended October 30, 2022. The current year tax provision includes a favorable state apportionment impact resulting from the acquisition of Main Event and legal entity restructuring as well as lower permanent differences, primarily non-deductible transaction costs as compared to the prior year and credits associated with the reversal of certain tax valuation allowances.
Liquidity and Capital Resources
Debt
In connection with the closing of the Main Event Acquisition on June 29, 2022, D&B Inc entered into a senior secured credit agreement, which refinanced the $500.0 million existing revolving facility, extended the maturity date to June 29, 2027, and added a new term loan facility in the aggregate principal amount of $850.0 million, with a maturity date of June 29, 2029 (“Credit Facility”). The proceeds of the term loan, net of an original issue discount of $42.5 million, were used to pay the consideration for the Acquisition. The revolving credit facility can expire before the stated maturity date if the aggregate outstanding principal amount of the 7.625% senior secured notes (described below) exceeds $100.0 million 91 days prior to November 1, 2025. A portion of the revolving facility not to exceed $35.0 million is available for the issuance of letters of credit.
On June 30, 2023, D&B Inc entered into the Amendment with its banking syndicate, which amended the Credit Facility. The Amendment provides for a new tranche of term loans in an aggregate principal amount of $900.0 (the “2023 Term B Loans”) which consist of $843.6 of 2023 refinancing Term B Loans which refinanced in full the term loans outstanding immediately prior to the Amendment effective date and $56.4 of 2023 additional Term B Loans, which will be used for general corporate and working capital purposes. The 2023 Term B Loans were issued with an original issue discount of 1%, reduced the interest rate margin applicable to term loans and revolving loans outstanding under the Credit Agreement by 1.25% and otherwise have terms substantially the same as the terms of the existing Term B Loans under the June 29, 2022 Credit Facility. The 2023 Term B Loans may be prepaid at any time, without premium or penalty, but are subject to a prepayment premium of 1.00% (subject to certain exceptions) if certain refinancing of, or amendment to, reduce the all-in-yield of the 2023 Term B Loans is made at any time during the first six months after the Amendment effective date.
The 2023 Term B Loans bear interest at Term SOFR (plus an additional credit spread adjustment of 0.10%) or ABR (each, as defined in the amended Credit Agreement) plus (i) in the case of Term SOFR loans, 3.75% per annum and (ii) in the case of ABR loans, 2.75% per annum. The Revolving Loans bear interest subject to a pricing grid based on the Borrower’s net total leverage, at Term SOFR (plus an additional credit spread adjustment of 0.10%) plus a spread ranging from 3.00% to 3.50% per annum or ABR plus a spread ranging from 2.00% to 2.50% per annum. Unused commitments under the revolving facility incur initial commitment fees of 0.30% to 0.50%.
As of October 29, 2023, we had letters of credit outstanding of $9.8 million and an unused commitment balance of $490.2 under the revolving facility. The Credit Facility may be increased through incremental facilities, by an amount equal to the greater of (i) $400.0 million and (ii) 0.75 times trailing twelve-month Adjusted EBITDA, as defined, plus additional amounts subject to compliance with applicable leverage ratio and/or interest coverage ratio requirements. The Credit Facility is unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries.
During fiscal 2020, the Company issued $550.0 million aggregate principal amount of 7.625% senior secured notes (the “Notes”). Interest on the Notes is payable in arrears on November 1 and May 1 of each year. The Notes mature on November 1, 2025, unless earlier redeemed, and are subject to the terms and conditions set forth in the related indenture. The Notes were issued by D&B Inc and are unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries. During fiscal 2022, the Company redeemed a total of $110.0 million outstanding principal amount of the Notes. 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 Company’s weighted average effective interest rate on our total debt facilities was 10.3% and 9.5% for the thirty-nine weeks ended October 29, 2023 and October 30, 2022, respectively.
Our debt agreements 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. The Credit Facility also requires the Company to maintain a maximum net total leverage ratio, as defined, as of the end of each fiscal quarter, beginning with the Company’s first full fiscal quarter after the Closing Date. We were in compliance with our covenants and the terms of our debt agreements as of October 29, 2023.
Sale-Leaseback
In October 2023, the Company entered into a sale and master lease agreement (a "sale-leaseback") with an unrelated third party. Under these agreements, the Company sold four of its store properties, including land, buildings and certain improvements, and then leased the assets back through the sale-leaseback transaction. As of October 29, 2023 the current outstanding liability of $0.2 million was recorded in accrued liabilities and the long term outstanding liability of $84.0 million was recorded in other liabilities on the consolidated balance sheet related to the financing liability. See further discussion at Note 5 to the consolidated financial statements.
Credit Adjusted EBITDA and Net Total Leverage Ratio.
Credit Adjusted EBITDA, a non-GAAP measure, represents Adjusted EBITDA plus certain other items as defined in our Credit Facility. See further discussion at Non-GAAP Financial Measures above. The following table reconciles Net income to Credit Adjusted EBITDA, as defined in our Credit Facility for the periods indicated:
| Trailing Four Quarters Ended October 29, 2023 | |
|---|---|
| Net income (loss) | $129.9 |
| Add back: | |
| Interest expense, net | 123.0 |
| Loss on debt refinancing | 11.2 |
| Provision for (benefit from) income taxes | 30.2 |
| Depreciation and amortization expense | 198.9 |
| EBITDA | 493.2 |
| Add back: | |
| Loss on asset disposal | 1.8 |
| Impairment of long-lived assets (1) | 1.7 |
| Share-based compensation (2) | 23.9 |
| Transaction and integration costs (3) | 12.5 |
| System implementation costs (4) | 6.8 |
| Consulting costs (5) | 2.0 |
| Pre-opening costs (6) | 16.5 |
| Entertainment revenue deferrals (7) | 10.1 |
| Other items, net | 0.4 |
| Credit Adjusted EBITDA, a non-GAAP measure | $568.9 |
(1) Amount includes property and equipment that was removed from service and recorded in other store operating expenses on the consolidated comprehensive income statement.
(2) Non-cash share-based compensation expense, net of forfeitures, recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(3) Transaction and integration costs related to the acquisition and integration of Main Event recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(4) System implementation costs represent expenses incurred related to the development of new enterprise resource planning, human capital management and inventory software for our stores and store support teams. These charges are primarily recorded in general and administrative expenses on the consolidated statement of comprehensive income (loss).
(5) Represents one-time, third-party consulting fees that are not part of our ongoing operations and were incurred to execute two related, discrete, and project-based strategic initiatives aimed at transforming our marketing strategy, which are included in general and administrative expenses on the consolidated statement of comprehensive income (loss). The transformative nature, narrow scope, and limited duration of these incremental consulting fees are not reflective of the ordinary course expenses incurred to operate our business.
(6) Represents costs incurred, primarily consisting of occupancy and payroll related expenses, associated with the opening of new stores. These costs are considered a "cost of new projects" as defined in our Credit Facility.
(7) Represents non-cash adjustments to our deferred entertainment revenue liabilities. These costs are considered an "other non-cash charge" as defined in our Credit Facility.
The Company's maximum permitted Net Total Leverage Ratio, as defined in our Credit Facility, is 3.5x. The following table calculates Net Total Leverage Ratio as of and for the period indicated:
| As Of And For The Trailing Four Quarters Ended October 29, 2023 | |
|---|---|
| Credit Adjusted EBITDA (a) | $568.9 |
| Total debt (1) | $1,374.5 |
| Less: Cash and cash equivalents | $(64.0) |
| Add: Outstanding letters of credit | $9.8 |
| Net debt (b) | $1,320.3 |
| Net Total Leverage Ratio (b / a) | 2.3 x |
(1) Amount represents the face amount of debt outstanding, net unamortized debt issuance costs and debt discount, and the outstanding lease financing payable as a result of a sale-leaseback transaction. See further discussion at Note 5 to the consolidated financial statements.
Dividends and Share Repurchases
On March 27, 2023, our Board of Directors approved a share repurchase program with an authorization limit of $100.0. On April 19, 2023, our Board of Directors approved an increase to the authorization limit of $200.0 for a total of $300.0 authorized under the program. On September 4, 2023 our Board of Directors approved an increase to the authorization limit of $100.0 for a total of $400.0 authorized under the program. During the thirty-nine weeks ended October 29, 2023, the Company repurchased 8.49 million shares at an average of $35.35 per share. The remaining dollar value of shares that may be repurchased under the program is $100.0 as of October 29, 2023.
There were no dividends declared or paid during the thirteen and thirty-nine weeks ended October 29, 2023. 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, compliance with debt agreements and other factors that the Board of Directors considers relevant.
Cash and Cash Equivalents
As of October 29, 2023, the Company had cash and cash equivalents of $64.0 million. The Company can operate with a working capital deficit because cash from sales is usually received before related liabilities for product supplies, labor and services become due. Our operations do not require significant inventory or receivables and we continually invest in our business through the growth of stores and operating improvement additions, which are reflected as non-current assets and not a part of working capital. Based on our current business plan, we believe our cash and cash equivalents combined with expected cash flows from operations, available borrowings under our revolving credit facility and expected payments from landlords should be sufficient not only for our operating requirements but also to enable us, in the aggregate, to finance our capital allocation strategy, including capital expenditures, through at least the next twelve months.
Cash Flow Activity
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, team member compensation, operations, occupancy, and other operating costs. Cash from operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, the timing of cash receipts and payments, and vendor payment terms.
Cash flow from operating activities decreased to $267.0 million for the thirty-nine weeks ended October 29, 2023 compared to $301.0 million for the thirty-nine weeks ended October 30, 2022. The decrease was primarily driven by the timing of changes in working capital.
Investing Activities — Cash flow used in investing decreased to $207.2 million for the thirty-nine weeks ended October 29, 2023 from $981.9 million for the thirty-nine weeks ended October 30, 2022 primarily due to the $818.7 net cash paid for the acquisition of Main Event in the thirty-nine weeks ended October 30, 2022, partially offset by an increase in capital expenditures.
Financing Activities — Cash flow used in financing was $177.4 million in the thirty-nine weeks ended October 29, 2023 primarily consisting of share repurchases and payments on outstanding debt and revolver balances, partially offset by net debt proceeds and proceeds from a sale-leaseback transaction. Cash flow from financing activities of $763.2 million in the thirty-nine weeks ended October 30, 2022 primarily consisted of net debt proceeds, partially offset by share repurchases, payments on revolver balances and debt issuance costs incurred.
Contractual Obligations and Commitments
Other than the activity discussed at Debt and Sale-Leaseback above, there have been no material changes to our contractual obligations since January 29, 2023, as reported on Form 10-K filed with the SEC on March 28, 2023.
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 for the fiscal year ended January 29, 2023.
Recent accounting pronouncements
Refer to Note 1 to the Unaudited Consolidated Financial Statements for information regarding new accounting pronouncements.
Market risk
As filed, 1,941 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Commodity Price Risk
We are exposed to market price fluctuation in food, beverage, supplies and 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.
Interest Rate Risk
In the second quarter of fiscal 2022, the Company elected SOFR as the alternative base rate for outstanding borrowings on the Credit Facility, which is based on variable rates. As of October 29, 2023, the Company had no balance outstanding on our revolving facility and an outstanding balance of $900.0 million on the term loan facility. The impact on our annual results of operations of a hypothetical one percentage point interest rate change on the outstanding balance of the credit facility as of October 29, 2023 would be approximately $9.0 million.
Inflation
Severe increases in inflation could affect the United States or global economies and have an adverse impact on our 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, we may not be able to adjust prices to sufficiently offset the effect of the various cost increases without negatively impacting consumer demand.
Controls and procedures
As filed, 1,246 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including the 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 Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
The Company implemented a new human resources information system (“HRIS”) during the third quarter ended October 29, 2023, which had a material impact on internal control over financial reporting. The Company will include the new HRIS in our evaluation of internal control over financial reporting for the fiscal year ending February 4, 2024. There were no other changes to our internal control over financial reporting practices or processes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during our third quarter ended October 29, 2023.
Risk factors
As filed, 124 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
See discussion in “Risk Factors” in Item 1A of the Company's Annual Report on Form 10-K for the year ended January 29, 2023.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2023-10-29. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2023-07-31 to 2023-10-29 | $466.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2023-01-30 to 2023-10-29 | $1.61bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months2023-07-31 to 2023-10-29 | $72.8m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months2023-01-30 to 2023-10-29 | $246.7m | us-gaap:CostOfRevenue |
| Operating income | 3 months2023-07-31 to 2023-10-29 | $18.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2023-01-30 to 2023-10-29 | $217.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months2023-07-31 to 2023-10-29 | $28.9m | us-gaap:InterestExpense |
| Interest expense | 9 months2023-01-30 to 2023-10-29 | $92.5m | us-gaap:InterestExpense |
| Income tax | 3 months2023-07-31 to 2023-10-29 | −$5.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2023-01-30 to 2023-10-29 | $22.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2023-07-31 to 2023-10-29 | −$5.2m | us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic |
| Net income | 9 months2023-01-30 to 2023-10-29 | $90.8m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months2023-07-31 to 2023-10-29 | −$0.12 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2023-01-30 to 2023-10-29 | $2.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2023-07-31 to 2023-10-29 | −$0.12 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2023-01-30 to 2023-10-29 | $2.05 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2023-07-31 to 2023-10-29 | 41,810,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2023-01-30 to 2023-10-29 | 45,090,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2023-01-30 to 2023-10-29 | $267.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2023-01-30 to 2023-10-29 | $207.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months2023-01-30 to 2023-10-29 | $300.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | At period end2023-10-29 | $64.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2023-10-29 | $157.0m | us-gaap:AssetsCurrent |
| Total assets | At period end2023-10-29 | $3.70bn | us-gaap:Assets |
| Current liabilities | At period end2023-10-29 | $419.3m | us-gaap:LiabilitiesCurrent |
| Long-term debt | At period end2023-10-29 | $1.28bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | At period end2023-10-29 | $9.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | At period end2023-10-29 | $211.6m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001628280-23-040750. Last ingested by Listed: Oct 27, 2026, 16:11 ET. Listed shows no prices and gives no investment advice.