Dave and Busters operates 203 “Eat, Drink, Play, and Watch” venues. 151 are under the name Dave and Busters while 52 are from the new acquisition “Maine Event”.
Q3 financials:
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Revenue $481.2m a 51% increase from 2022 and a 60.7% increase from 2019.
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Net income $1.9m, 2021 was $10.6m and 2019 was $0.5m
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EBITDA $90m a 32% increase from 2021 and a 94.4% increase from 2019
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liquidity $599m, $108m cash and $491m in RCF
Forward looking expectation:
For year 2023:
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Revenue $1.9B a 48% increase YoY
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EBITDA $425m a 30% increase YoY
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Net Income $138m a 22% increase YoY
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Free cash flow $145m
For year 2024 expectations:
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Revenue $2.3B 20% increase YoY
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EBITDA $532m 25% increase YoY
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Net Income $171m 25% increase YoY
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Free cash flow $151m a 4.4% increase YoY
Debt to asset ratio is 90.2% with $3.7B in assets and $3.32B in debts. Which is a lot of debt in my opinion.
To me I see a high rate of expected growth in a popular sector. But the moat is primarily due to size and financials, with little actual moat to stop someone from replicating them. However being able to fund new locations and buy small competitors is in-itself a kind of moat since there isn’t a real competitor of its size.
During covid they obviously had some trouble which impacted their stock price which is currently trading at $41 or a $1.98B market cap. PE is 16.3.
I believe this is a buy. But with a potential recession and high rates they could experience less growth than forecasted. Luckily they have high margins and free cash flow which I believe will help them weather any problems in the future just as they did through covid.
I opened a position today and will continue to add to it unless I see changes in their current model.
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