PLAY 2Q25

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September 15, 2025

Dave & Buster's Entertainment Investment Report - Q2 2025 Turnaround Strategy & New Leadership

DAVE & BUSTER'S ENTERTAINMENT (PLAY)

🎮🍔 New CEO Turnaround Strategy with 220+ Entertainment Venues & International Expansion

Q2 2025 Earnings Report | $557.4M Revenue (+0.05% Y/Y) with $820M Market Cap

💰 Market Cap: $820M | 📊 Revenue: $557.4M (+0.05% Y/Y) | 🎮 Stores: 220+ Venues

🏢 New CEO Tarun Lal | 🌍 5+ International Franchises | 🎯 "Back to Basics" Strategy

$20.54

📉 -$3.65 (-15.09%) AH

Sharp After-Hours Decline

Price Target Scenarios

18-Month Horizon (2026 Targets)

$14.00

Bear Case (-32%)

Consumer Spending Collapse

Competition Pressure

📊 Valuation Calculation:

• 2026E EBITDA: $380M × EV/EBITDA: 5x = $14.00

🔻 Key Assumptions:

Same-store sales decline accelerates • Consumer recession hits discretionary spending • New store openings fail to drive growth • High debt burden creates financial stress

$27.00

Base Case (+31%)

Turnaround Success

Steady Execution

📊 Valuation Calculation:

• 2026E EBITDA: $475M × EV/EBITDA: 7x = $27.00

⚖️ Key Assumptions:

Same-store sales return to positive • "Back to Basics" strategy succeeds • New store expansion drives growth • International franchises gain traction

$35.00

Bull Case (+70%)

Strong Recovery

Market Leadership

📊 Valuation Calculation:

• 2026E EBITDA: $575M × EV/EBITDA: 9x = $35.00

🚀 Key Assumptions:

Strong same-store sales recovery • CEO achieves $675M EBITDA target trajectory • Successful international expansion • Remodel program drives significant traffic gains

Bottom Line for Retail Investors

👨‍💼

New Leadership

CEO Tarun Lal appointed July 2025, "Back to Basics" strategy implementation

🎮

Entertainment Empire

220+ venues across North America, unique "eatertainment" market position

🌍

Global Expansion

5+ international franchises planned, proven remodel strategy success

⚠️

Turnaround Risk

Same-store sales declining, execution risk on new strategy, high leverage

📈 Q2 2025 "New Leadership & Strategic Reset" Results

Stock Down 15.09% After Hours Following Q2 Earnings Miss and Guidance Concerns

📊

$557.4M

Revenue

+0.05% Y/Y, Flat

💰

$0.32

EPS (Actual)

Miss vs $0.92 Est.

📉

-3.0%

Comp Sales

Same-Store Decline

🏢

220+

Total Venues

D&B + Main Event

👨‍💼 CEO Tarun Lal & Management: Turnaround & Strategic Reset

👨‍💼 New Leadership: "Tarun Lal appointed as CEO effective July 14, 2025, bringing 30+ years at Yum! Brands including KFC Global CEO experience"

🎯 Back to Basics Strategy: "Focused execution on 5 key areas: marketing, F&B, operations, games, and remodels after previous plan tried to do too much at once"

🏗️ Store Remodels Success: "Remodeled stores outperforming system by 700 basis points, new cost-effective prototype launching soon"

🌍 International Expansion: "Second India franchise opened in August, 5+ additional international locations planned next 6 months"

💰 EBITDA Target: "CEO compensation tied to achieving $675M annual EBITDA target, down from original $1B strategic plan"

🎮 Gaming Strategy: "10+ new games annually going forward, seeking exclusive IP partnerships for differentiation"

📊 Q2 2025 Performance & Key Metrics

Metric	Q2 2025	Y/Y Growth
Total Revenue	$557.4M	+0.05%
Adjusted EPS	$0.40	Miss vs $0.92 Est.
Same-Store Sales	-3.0%	Down from -2.2% First 5 Weeks
Adjusted EBITDA	$130M	23% Margin

Sale-Leaseback Proceeds (Q2)$77M Real Estate

Eat & Play Combo Opt-In8-10% Rate

🎯 Revised 2025+ Strategic Goals

"CEO compensation tied to achieving $675M annual EBITDA target (revised down from original $1B plan), with focused execution on 5 core areas rather than previous overly complex strategy" - CEO Tarun Lal

🚀 Why PLAY Bulls Are Right

✅CEO Compensation Alignment: Tarun Lal's compensation tied to $675M EBITDA target (vs current ~$130M quarterly run rate), creating strong incentive alignment
✅Focused Execution Strategy: Streamlined from previous overly complex plan to 5 core areas, preventing execution missteps of the past
✅Strong Unit Economics: Maintaining 40%+ year-one returns on new stores despite challenging environment, with capital-light sale-leaseback model
✅Value Pricing Reset: Simplified game pricing structure allowing guests to play longer for same spend, improving dwell time and satisfaction
✅International Franchise Momentum: Second India location opened, 5+ more planned next 6 months with minimal capital investment required

🐻 Why PLAY Bears Have Valid Concerns

⚠️Persistent Same-Store Sales Decline: -3.0% comp sales in Q2 following -8.3% Q1 decline shows ongoing fundamental challenges
⚠️Discretionary Spending Vulnerability: Entertainment dining highly sensitive to economic downturns and consumer spending cuts
⚠️Execution Risk on Turnaround: New CEO strategy still unproven, requires sustained execution across 220+ locations
⚠️High Leverage Burden: 3.2x net leverage ratio limits financial flexibility during challenging operating environment
⚠️Competitive Gaming Landscape: Rising competition from mobile gaming, streaming entertainment, and alternative leisure activities

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial advisor before making investment decisions.