• Negative outlook from S&P Global, debt trades wide to high-yield benchmarks
• 1Q26 revenue down 1.5% YoY, adjusted EBITDA down 9.5% YoYInternational expansion, cost reduction efforts key to turnaround

Overview:

Dave & Buster’s Entertainment, Inc. (PLAY) is a leading owner and operator of high-volume entertainment and dining venues across North America under the Dave & Buster’s and Main Event brands. Credit metrics remain under pressure amid a prolonged same-store sales downturn, with S&P Global revising its outlook on the Company to negative from stable on July 26, 2026, while affirming its B- issuer rating. The Company’s debt trades materially wide to both the broader high-yield market and similarly-rated peers, with First Lien Term Loan B tranches yielding 11.7%–12.7%, significantly wider than the ICE BofA Single-B US HY Index (7.26%).

Dave & Buster’s reported 1Q26 total revenue of USD 559.2m, down 1.5% YoY, as comparable store sales fell 5.4% on reduced walk-in traffic, partially offset by noncomparable store growth from recent openings. Adjusted EBITDA declined 9.5% YoY to USD 123.2m, with margins contracting to 22.0% from 24.0% on revenue deleverage across occupancy, labor, and marketing costs.  The company is expecting growth to come from international expansion, reduced costs, and success in bringing back customers in an economy where out-of-home entertainment is already struggling.

Debt and Liquidity:

On 5 May 2026, PLAY had a total debt of USD 1.947bn, comprising of USD 1.53bn in secured debt, USD 33m in finance leases, and USD 384m in long-term lease financing. PLAY net leverage was 4.7x.

The next major maturities are USD 749m and USD 47m of First Lien Term Loan B’s, due June 2029.

On 5 May, PLAY liquidity totaled USD 499m, comprising USD 20m in cash and USD 480m in revolver availability. Over the NTM, liquidity is estimated to increase 3% to USD 514m.

Valuation:

LTM net leverage was 4.7x in 1Q26 as EBITDA YoY softened on weak same-store sales, leading to a cautious outlook.

Downside risks include a failure to sustain the recent stabilization in traffic trends through 2H26. Elevated cost-of-living pressure (gas prices spiking toward $4.04/gal in 2Q26 on Strait of Hormuz-related supply disruption, CPI running high-2% to high-3%, AI disruptions), present additional pressure on free cash flow. However, the broader casual dining sector’s resilience through 2Q26 suggests PLAY’s underperformance is more company-specific or related to out of home entertainment sector struggles than macro-driven.

International expansion (currently 30 committed locations) may be a long-term source of growth outside domestic revenues, however the buildout costs could temporarily weigh on CapEx harming FCF before benefits are felt.

PLAY currently trades at an LTM EV/EBITDA ratio of 5.4x compared to the peer group of 11.5x. The company is trading at an NTME EV/EBITDA multiple of 5.6x compared to the peer group of 10.0x. With adjusted EBITDA including rent expense, PLAY’s profitability is discounted relative to peers that own their real estate as the company mainly leases. Capitalizing rent at a standard 8x multiple to derive Adjusted EV, and adding rent back to EBITDA to derive EBITDAR, corrects for this and puts all names on a comparable, ownership-neutral basis. On this basis, PLAY’s NTME EV/EBITDAR is 6.5x vs. 9,5x for peers, narrowing the discount by roughly a third.

We expect Dave and Busters EBITDA to decline in the NTM, while the opposite is predicted for the peer group.

Our NTME valuation for PLAY, at an NTME EV/EBITDA multiple of 5.5x and an NTME adjusted EBITDA of USD 410m results in an equity price of USD 9.29 per share, a discount compared to the current price of 10.26.

Relative Value Analysis:

Dave & Buster’s debt trades materially wide to high-yield benchmarks and even wide to similarly rated peers, reflecting investor skepticism around its same-store sales recovery despite comparatively modest leverage.

The First Lien Term Loan B tranches yield 11.7%–12.7% roughly 440bps–720bps above the ICE BofA Single-B US HY Index (7.26%). This is notably wide relative to Lucky Strike (also B3/B), whose First Lien Term Loan B yields just 9.7%.

1Q26 Results:

Dave & Buster’s reported 1Q26 total revenue of USD 559.2m, down 1.5% YoY, as an 18.1m increase in noncomparable store revenue and a 2.6m increase in other noncomparable revenue only partially offset a 29.2m decline in comparable store sales. Comparable store sales fell 5.4% YoY, driven by reduced walk-in traffic, while entertainment revenue (61.7% of the mix) declined 6.2% to USD 345.1m from USD 366.6m, and food and beverage revenue rose 6.1%to USD 214.1m from USD 201.m due to higher pricing.

Adjusted EBITDA fell 9.5% YoY to USD 123.2m, with margins contracting to 22.0% from 24.0%, driven by revenue deleverage on fixed occupancy, labor, and marketing costs. New unit growth continued, with one domestic store opened in 1Q26 and three more in 2Q26 to date, alongside six completed remodels (two more planned) under a lower-cost prototype generating comparable same-store sales lift to legacy remodels at roughly half the capital cost. On an NTM basis, we project total revenues of approximately USD 2,115m, comprising USD 1.83bn of comparable store revenue, USD 246m of noncomparable store revenue, and USD 40m of other revenue (primarily international franchise royalties), reflecting new unit growth and the remodel program offsetting the continued comparable store sales decline.

PLAY reports Adjusted EBITDA as well as Adjusted Credit EBITDA. On an LTM basis from 1Q26, Adjusted Credit EBITDA was USD 462m compared to USD 424m for Adjusted EBITDA due to credit facility and pre-opening cost add backs. The Company voluntarily discloses this reconciliation and the resulting 3.3x Net Total Leverage Ratio in its earnings releases. The current covenant on the RCF states that total leverage must be under 4.0x on the last day of each quarter if the RCF usage exceeds 35% of the commitment. Given our NTME adjusted EBITDA of USD 410m, and considering approximately USD 40m in add-backs for credit-adjusted EBITDA on an LTM basis, PLAY will not be in breach of any covenants.

In 1Q26, operating cash flow was USD 113.8m, up from USD 95.8m in 1Q25, aided by working capital timing (AP and accrued liability builds). FCF improved to USD 9m from a USD 59m cash burn in 1Q25, largely due to CapEx discipline (USD 105m in 1Q26 compared to USD 155m in 1Q25).

Business Description:

Dave & Buster’s Entertainment, Inc. is a publicly listed owner and operator of entertainment and dining venues headquartered in Coppell, Texas, and one of the largest operators of arcade venues and second-largest operator of bowling centers in North America. The Company operates across roughly 44 states, Puerto Rico, and one Canadian province. Dave & Buster’s provides a broad range of entertainment and dining offerings spanning redemption and simulation games, bowling, laser tag, billiards, and full-service food and beverage, with a growing emphasis on international expansion.

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