10-Q: Dave & Buster's Q1 Revenue Declines Amidst Increased Costs

Dave & Buster's reported a 1.5% decrease in total revenues for the first quarter ended May 5, 2026, driven by a 5.4% drop in comparable store sales, while net income fell significantly year-over-year.

Summary

• Total revenues for the first quarter ended May 5, 2026, were $559.2 million, a decrease of 1.5% compared to $567.7 million in the prior year period.
• Comparable store sales decreased by 5.4% compared to the same period in 2025.
• Net income for the quarter was $5.7 million, or $0.16 per diluted share, a substantial decrease from $21.7 million, or $0.62 per diluted share, in the first quarter of 2025.
• Adjusted EBITDA decreased by 9.5% to $123.2 million from $136.1 million in the prior year period.
• Operating income decreased to $46.9 million from $63.2 million in the prior year period.
• The company opened one new Dave & Buster's branded store during the quarter, bringing the total store count to 244.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the significant decline in revenues, net income, and comparable store sales, coupled with rising operating costs and a higher effective tax rate.

Positives

• Total cost of products as a percentage of total revenues decreased to 14.3% from 14.5% in the prior year.
• Cost of food and beverage products as a percentage of food and beverage revenues decreased to 24.5% from 25.6% in the prior year, due to menu enhancements.
• Cash flow from operating activities increased to $113.8 million from $95.8 million in the prior year, primarily due to changes in working capital.
• Capital expenditures decreased to $105.3 million from $154.6 million in the prior year.
• The company has $104.0 million remaining under its share repurchase program.
• The company believes its cash and cash equivalents, combined with expected cash flows from operations and available borrowings, will be sufficient for operating requirements and capital allocation strategy for at least the next twelve months.

Negatives

• Total revenues decreased by $8.5 million (1.5%) to $559.2 million compared to the prior year.
• Comparable store sales decreased by $29.2 million.
• Net income decreased to $5.7 million from $21.7 million, a drop of over 73%.
• Diluted earnings per share decreased to $0.16 from $0.62.
• Adjusted EBITDA decreased by $12.9 million (9.5%).
• Operating income decreased by $16.3 million.
• Operating payroll and benefits as a percentage of total revenues increased to 25.1% from 23.8% due to sales deleveraging.
• General and administrative expenses increased to $27.5 million from $24.4 million, and as a percentage of total revenues increased to 4.9% from 4.3%.
• Depreciation and amortization expense increased to $70.9 million from $63.2 million.
• The effective tax rate increased significantly to 43.0% from 17.8% in the prior year period.

Risks

• The company is exposed to market price fluctuations in food, beverage, supplies, and energy costs, which could materially impact food costs.
• Tariffs and trade regulations could influence the cost of purchased materials.
• Borrowings under the Credit Facility bear interest based on variable interest rates, making the company susceptible to interest rate changes.
• Severe increases in inflation could adversely impact the business, financial condition, and results of operations.
• The company faces risks related to its substantial indebtedness and covenants in its debt agreements restricting its ability to implement its business plan.
• Risks related to information systems and potential cybersecurity breaches or other privacy or data incidents.
• The company must comply with extensive laws and regulations.
• The company's ability to obtain and renew leases on favorable terms or at all.

Future Outlook

The company believes its current cash and cash equivalents, combined with expected cash flows from operations and available borrowings under its Revolving Credit Facility, will be sufficient to meet its operating requirements and finance its capital allocation strategy, including capital expenditures, for at least the next twelve months. Future decisions regarding dividends and share repurchases remain at the discretion of the Board of Directors.

Management Comments

• The company believes that Adjusted EBITDA provides useful information to investors and analysts regarding its operating performance by excluding items not indicative of core operating performance.
• Management believes that Store Operating Income Before Depreciation and Amortization is a useful measure for evaluating operating performance across stores of varying size and volume, and within the entertainment and dining industry.
• The company believes its disclosure controls and procedures are effective.
• The company's Chief Executive Officer and Chief Financial Officer have disclosed to auditors and the audit committee all significant deficiencies and material weaknesses in internal control over financial reporting and any fraud involving management or employees with a significant role in internal control.

Industry Context

StockSavvy.ai notes that Dave & Buster's, operating in the competitive entertainment and dining sector, is facing challenges common to the industry, including rising operating costs and shifts in consumer spending patterns, as evidenced by the decline in comparable store sales and increased G&A expenses.

Comparison to Industry Standards

• The decline in comparable store sales of 5.4% suggests a potential underperformance relative to broader casual dining or entertainment venue benchmarks, which may be experiencing more stable or growing foot traffic.
• The increase in operating payroll and benefits as a percentage of revenue (25.1% vs. 23.8%) indicates potential labor cost pressures that might be higher than industry averages, impacting profitability.
• The significant increase in the effective tax rate to 43.0% from 17.8% is notably higher than typical industry effective tax rates, which could be a drag on net income compared to peers.
• The company's Adjusted EBITDA margin of 22.0% is a key metric for comparison within the entertainment/dining sector, and its decrease from 24.0% warrants monitoring against competitors' performance.

Management Changes

Legal Proceedings

• The company is subject to legal proceedings and claims arising in the ordinary course of business, including workplace and employment matters, discrimination, slip-and-fall incidents, and similar matters. Management believes the ultimate liability will not materially affect financial condition or results of operations.
• The company is subject to a settlement agreement with the Federal Trade Commission requiring a comprehensive information security program to protect personal consumer information.

Stakeholder Impact

• Shareholders: The significant decrease in net income and earnings per share may negatively impact shareholder value and investor sentiment.
• Employees: Increased employee-related costs contributed to higher general and administrative expenses.
• Suppliers: Potential for increased costs due to commodity price fluctuations, tariffs, and trade regulations.
• Creditors: The company's substantial indebtedness and debt covenants require careful monitoring to ensure compliance and financial stability.

Next Steps

• The company will continue to monitor and manage its operating costs and capital expenditures.
• Future decisions regarding share repurchases and dividends will be made by the Board of Directors based on operating performance, financial condition, and other factors.
• The company will continue to evaluate its business strategy and operating models.

Key Dates

Recommendation

While the company faces significant headwinds with declining revenues and profitability, the increase in operating cash flow, the remaining share repurchase authorization, and the belief in sufficient liquidity for the next twelve months suggest a 'hold' recommendation. Investors should monitor comparable store sales trends and cost management efforts closely.

Keywords

Dave & Buster's, Form 10-Q, Quarterly Report, Entertainment, Dining, Restaurant, Financial Results, Revenue, Net Income, Comparable Store Sales, Adjusted EBITDA, SEC Filing