Accel Entertainment, Inc. (NYSE: ACEL) today announced certain
financial and operating results for the three-months and full year
ended December 31, 2022.
Highlights:
- Ended 2022 with 3,598 locations; an increase of 39% compared to
2021 due primarily to the acquisition of Century Gaming, Inc.
("Century")
- Ended 2022 with 23,150 gaming terminals; an increase of 70%
compared to 2021 due primarily to the acquisition of Century
- Record year for Revenue, Net Income, and Adjusted EBITDA
- Revenue of $278 million for Q4 2022 and $970 million for YE
2022
- Net income of $13 million for Q4 2022 and $74 million for YE
2022
- Adjusted EBITDA of $43 million for Q4 2022 and $162 million for
YE 2022
- 2022 ended with $318 million of net debt; an increase of 123%
compared to 2021 due primarily to borrowings of $160 million on our
credit facility in Q2 2022 to finance the Century acquisition
- Repurchased $17 million of Accel Class A-1 common stock in Q4
2022 and $79 million for the full year 2022
- On December 15, 2022, Century acquired DEP, Inc.
("Progressive"), a gaming operator in Montana, which added 26
Montana gaming locations and approximately 300 gaming terminals to
the Century portfolio
Accel Entertainment CEO Andy Rubenstein commented, “We are
pleased to report another strong quarter of results which led to a
record full year 2022. The integration of Century is well underway
and we remained focused on continuing to grow our business both
organically and inorganically. Our asset-light and hyper-local
business model remains compelling and continues to give us a truly
unique competitive advantage in the industry as we further cement
Accel’s position as the preferred choice in distributed
gaming.”
Consolidated Statements of Operations and Other Data
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2022
2021
2022
2021
Total net revenues
$
278,070
$
192,313
$
969,797
$
734,707
Operating income
25,094
17,063
96,855
70,192
Income before income taxes
17,535
10,050
94,762
46,576
Net income
13,406
6,806
74,102
31,559
Other Financial Data:
Adjusted EBITDA(1)
43,309
33,236
162,392
139,663
Adjusted net income (2)
20,822
17,301
79,875
71,407
(1)
Adjusted EBITDA is defined as net income
plus amortization of intangible assets and route and customer
acquisition costs; (gain) loss on change in fair value of
contingent earnout shares; stock-based compensation expense; other
expenses, net; tax effect of adjustments; depreciation and
amortization of property and equipment; interest expense; emerging
markets; income tax expense; and loss on debt extinguishment. For
additional information on Adjusted EBITDA and a reconciliation of
net income to Adjusted EBITDA, see “Non-GAAP Financial
Measures—Adjusted EBITDA and Adjusted net income.”
(2)
Adjusted net income is defined as net
income plus amortization of intangible assets and route and
customer acquisition costs; (gain) loss on change in fair value of
contingent earnout shares; stock-based compensation expense; other
expenses, net; and tax effect of adjustments. For additional
information on Adjusted net income and a reconciliation of net
income to Adjusted net income, see "Non-GAAP Financial Measures—
Adjusted net income and Adjusted EBITDA.”
(in thousands)
Three Months Ended December
31,
Year Ended December
31,
2022
2021
2022
2021
Net revenues by state:
Illinois
$
206,917
$
191,033
$
808,652
$
730,244
Nevada
29,630
—
66,989
—
Montana
35,357
—
79,639
—
Other
6,166
1,280
14,517
4,463
Total net revenues
$
278,070
$
192,313
$
969,797
$
734,707
Key Business Metrics
Locations (1)
As of December 31,
2022
2021
Illinois
2,648
2,584
Montana
610
—
Nevada
340
—
Total locations
3,598
2,584
Terminals (1)
As of December 31,
2022
2021
Illinois
14,397
13,639
Montana
6,108
—
Nevada
2,645
—
Total terminals
23,150
13,639
(1)
Based on a combination of third-party
portal data and data from our internal systems. This metric is
utilized by Accel to continually monitor growth from existing
locations, organic openings, acquired locations, and competitor
conversions.
Consolidated Statements of Cash Flows Data
Year Ended December
31,
(in thousands)
2022
2021
Net cash provided by operating
activities
$
107,999
$
110,755
Net cash used in investing activities
(189,263
)
(34,544
)
Net cash provided by (used in) financing
activities
106,591
(11,876
)
Non-GAAP Financial Measures
Three Months Ended December
31,
Year Ended December
31,
(in thousands)
2022
2021
2022
2021
Net income
$
13,406
$
6,806
$
74,102
$
31,559
Adjustments:
Amortization of intangible assets and
route and customer acquisition costs(1)
5,206
3,551
17,484
22,040
Stock-based compensation(2)
1,884
1,696
6,840
6,403
(Gain) loss on change in fair value of
contingent earnout shares(3)
(47
)
2,895
(19,544
)
9,762
Other expenses, net(4)
1,426
4,076
9,320
12,989
Tax effect of adjustments(5)
(1,053
)
(1,723
)
(8,327
)
(11,346
)
Adjusted net income
20,822
17,301
79,875
71,407
Depreciation and amortization of property
and equipment
8,720
5,816
29,295
24,636
Interest expense, net
7,606
2,966
21,637
12,702
Emerging markets(6)
979
1,034
2,598
3,403
Income tax expense
5,182
4,967
28,987
26,363
Loss on debt extinguishment
—
1,152
—
1,152
Adjusted EBITDA
$
43,309
$
33,236
$
162,392
$
139,663
(1)
Amortization of intangible assets and
route and customer acquisition costs consist of upfront cash
payments and future cash payments to third-party sales agents to
acquire the location partners that are not connected with a
business acquisition, as well as the amortization of other
intangible assets. Accel amortizes the upfront cash payment over
the life of the contract, including expected renewals, beginning on
the date the location goes live, and recognizes non-cash
amortization charges with respect to such items. Future or deferred
cash payments, which may occur based on terms of the underlying
contract, are generally lower in the aggregate as compared to
established practice of providing higher upfront payments, and are
also capitalized and amortized over the remaining life of the
contract. Future cash payments do not include cash costs associated
with renewing customer contracts as Accel does not generally incur
significant costs as a result of extension or renewal of an
existing contract. Location contracts acquired in a business
combination are recorded at fair value as part of the business
combination accounting and then amortized as an intangible asset on
a straight-line basis over the expected useful life of the contract
of 15 years. “Amortization of intangible assets and route and
customer acquisition costs” aggregates the non-cash amortization
charges relating to upfront route and customer acquisition cost
payments and location contracts acquired, as well as the
amortization of other intangible assets.
(2)
Stock-based compensation consists of
options, restricted stock units and warrants.
(3)
(Gain) loss on change in fair value of
contingent earnout shares represents a non-cash fair value
adjustment at each reporting period end related to the value of
these contingent shares. Upon achieving such contingency, shares of
Class A-2 common stock convert to Class A-1 common stock resulting
in a non-cash settlement of the obligation.
(4)
Other expenses, net consists of (i)
non-cash expenses including the remeasurement of contingent
consideration liabilities, (ii) non-recurring lobbying and legal
expenses related to distributed gaming expansion in current or
prospective markets, (iii) non-recurring costs associated with
COVID-19 and (iv) other non-recurring expenses.
(5)
Calculated by excluding the impact of the
non-GAAP adjustments from the current period tax provision
calculations.
(6)
Emerging markets consist of the results,
on an Adjusted EBITDA basis, for non-core jurisdictions where our
operations are developing. Markets are no longer considered
emerging when Accel has installed or acquired at least 500 gaming
terminals in the jurisdiction, or when 24 months have elapsed from
the date Accel first installs or acquires gaming terminals in the
jurisdiction, whichever occurs first. The Company currently views
Nebraska, Iowa and Pennsylvania as its emerging markets. Prior to
July 2022, Georgia was considered an emerging market.
Reconciliation of Debt to Net Debt
As of December 31,
(in thousands)
2022
2021
Debt, net of current maturities
$
518,566
$
324,022
Plus: Current maturities of debt
23,466
17,500
Less: Cash and cash equivalents
(224,113
)
(198,786
)
Net debt
$
317,919
$
142,736
Conference Call
Accel will host an investor conference call on February 28, 2023
at 4:30 p.m. Central time (5:30 p.m. Eastern time) to discuss these
financial and operating results. Interested parties may join the
live webcast by registering at
https://www.netroadshow.com/events/login?show=118523a6&confId=46443
or accessing the webcast via the company’s investor relations
website: ir.accelentertainment.com. Following completion of the
call, a replay of the webcast will be posted on Accel’s investor
relations website.
About Accel
Accel believes it is the leading distributed gaming operator in
the United States on an Adjusted EBITDA basis, and a preferred
partner for local business owners in the Illinois, Montana, and
Nevada markets. Accel’s business consists of the installation,
maintenance and operation of gaming terminals, redemption devices
that disburse winnings and contain ATM functionality, and other
amusement devices in authorized non-casino locations such as
restaurants, bars, taverns, convenience stores, liquor stores,
truck stops, and grocery stores.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical fact,
contained in this press release are forward-looking statements,
including, but not limited to, any statements regarding our
estimates of number of gaming terminals, locations, revenues,
Adjusted EBITDA and capital expenditures. The words “predict,”
“estimated,” “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “may,” “plans,” “projects,” “will,” “would,” “continue,”
and similar expressions or the negatives thereof are intended to
identify forward-looking statements. These forward-looking
statements represent our current reasonable expectations and
involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance and achievements, or
industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. We cannot guarantee the accuracy of the
forward-looking statements, and you should be aware that results
and events could differ materially and adversely from those
contained in the forward-looking statements due to a number of
factors including, but not limited to: Accel's ability to
successfully integrate its business with the business of Century
and realize the full benefits of the Century acquisition; Accel’s
ability to operate in existing markets or expand into new
jurisdictions; Accel’s ability to manage its growth effectively;
Accel’s ability to offer new and innovative products and services
that fulfill the needs of location partners and create strong and
sustained player appeal; Accel’s dependence on relationships with
key manufacturers, developers and third parties to obtain gaming
terminals, amusement machines, and related supplies, programs, and
technologies for its business on acceptable terms; the negative
impact on Accel’s future results of operations by the slow growth
in demand for gaming terminals and by the slow growth of new gaming
jurisdictions; Accel’s heavy dependency on its ability to win,
maintain and renew contracts with location partners; the existing
and potential future adverse impact of the COVID-19 pandemic on
Accel’s business, operations and financial condition, including as
a result the suspensions of all video gaming terminal operations by
the Illinois Gaming Board between November 19, 2020 and January 23,
2021, which suspensions could be reinstated; unfavorable
macroeconomic conditions or decreased discretionary spending due to
other factors such as increased interest rates, increased
inflation, high fuel rates, recessions, epidemics or other public
health issues (including COVID-19 and its variant strains),
terrorist activity or threat thereof, civil unrest or other
macroeconomic or political uncertainties, that could adversely
affect Accel’s business, results of operations, cash flows and
financial conditions and other risks and uncertainties indicated
from time to time in documents filed or to be filed with the
Securities and Exchange Commission (“SEC”).
Accordingly, forward-looking statements, including any
projections or analysis, should not be viewed as factual and should
not be relied upon as an accurate prediction of future results. The
forward-looking statements contained in this press release are
based on our current expectations and beliefs concerning future
developments and their potential effects on Accel. These
forward-looking statements involve a number of risks, uncertainties
(some of which are beyond our control), or other assumptions that
may cause actual results or performance to be materially different
from those expressed or implied by these forward-looking
statements. These risks and uncertainties include, but are not
limited to, those factors described in the section entitled “Risk
Factors” in the Annual Report on Form 10-K filed by Accel with the
SEC, as well as Accel’s other filings with the SEC. Except as
required by law, we do not undertake publicly to update or revise
these statements, even if experience or future changes make it
clear that any projected results expressed in this or other press
releases or future quarterly reports, or company statements will
not be realized. In addition, the inclusion of any statement in
this press release does not constitute an admission by us that the
events or circumstances described in such statement are material.
We qualify all of our forward-looking statements by these
cautionary statements. In addition, the industry in which we
operate is subject to a high degree of uncertainty and risk due to
a variety of factors including those described in the section
entitled “Risk Factors” in the Annual Report on Form 10-K filed by
Accel with the SEC, as well as Accel’s other filings with the SEC.
These and other factors could cause our results to differ
materially from those expressed in this press release.
Non-GAAP Financial Information
This press release includes certain financial information not
prepared in accordance with Generally Accepted Accounting
Principles in the United States (“GAAP”), including Adjusted
EBITDA, Adjusted net income, and Net Debt. Adjusted EBITDA,
Adjusted net income, and Net Debt are non-GAAP financial measures
and are key metrics used to monitor ongoing core operations.
Management of Accel believes Adjusted EBITDA, Adjusted net income,
and Net Debt enhance the understanding of Accel’s underlying
drivers of profitability and trends in Accel’s business and
facilitates company-to-company and period-to-period comparisons,
because these non-GAAP financial measures exclude the effects of
certain non-cash items, represents certain nonrecurring items that
are unrelated to core performance, or excludes non-core operations.
Management of Accel also believes that these non-GAAP financial
measures are used by investors, analysts and other interested
parties as measures of financial performance.
Adjusted EBITDA, Adjusted net income, and Net Debt
Although Accel excludes amortization of intangible assets and
route and customer acquisition costs from Adjusted EBITDA and
Adjusted net income, Accel believes that it is important for
investors to understand that these route, customer and other
intangible assets contribute to revenue generation. Any future
acquisitions may result in amortization of intangible assets and
route and customer acquisition costs.
Adjusted EBITDA, Adjusted net income, and Net Debt are not
recognized terms under GAAP. These non-GAAP financial measures
exclude some, but not all, items that affect net income, and these
measures may vary among companies. These non-GAAP financial
measures are unaudited and have important limitations as an
analytical tool, should not be viewed in isolation and do not
purport to be alternatives to net income as indicators of operating
performance.
ACCEL ENTERTAINMENT,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(in thousands, except per share
amounts)
Years ended December
31,
2022
2021
2020
Revenues:
Net gaming
$
925,009
$
705,784
$
300,520
Amusement
21,106
16,667
9,247
Manufacturing
7,621
—
—
ATM fees and other revenue
16,061
12,256
6,585
Total net revenues
969,797
734,707
316,352
Operating expenses:
Cost of revenue (exclusive of depreciation
and amortization expense shown below)
666,126
494,032
211,086
Cost of manufacturing goods sold
(exclusive of depreciation and amortization expense shown
below)
4,775
—
—
General and administrative
145,942
110,818
77,420
Depreciation and amortization of property
and equipment
29,295
24,636
20,969
Amortization of intangible assets and
route and customer acquisition costs
17,484
22,040
22,608
Other expenses, net
9,320
12,989
8,948
Total operating expenses
872,942
664,515
341,031
Operating income (loss)
96,855
70,192
(24,679
)
Interest expense, net
21,637
12,702
13,707
(Gain) loss on change in fair value of
contingent earnout shares
(19,544
)
9,762
(8,484
)
Gain on change in fair value of
warrants
—
—
(12,574
)
Loss on debt extinguishment
—
1,152
—
Income (loss) before income tax expense
(benefit)
94,762
46,576
(17,328
)
Income tax expense (benefit)
20,660
15,017
(16,918
)
Net income (loss)
$
74,102
$
31,559
$
(410
)
Earnings (loss) per share:
Basic
$
0.82
$
0.34
$
0.00
Diluted
0.81
0.33
(0.02
)
Weighted average number of shares
outstanding:
Basic
90,629
93,781
83,045
Diluted
91,229
94,638
83,113
ACCEL ENTERTAINMENT,
INC.
CONSOLIDATED BALANCE
SHEETS
(in thousands, except par value and share
amounts)
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
224,113
$
198,786
Accounts receivable, net
11,166
5,121
Prepaid expenses
7,407
6,998
Inventories
6,941
—
Income taxes receivable
538
—
Interest rate caplets
8,555
—
Investment in convertible notes
32,065
32,065
Other current assets
8,427
5,025
Total current assets
299,212
247,995
Property and equipment, net
211,844
152,251
Other assets:
Route and customer acquisition costs,
net
18,342
15,913
Location contracts acquired, net
189,343
150,672
Goodwill
100,707
46,199
Other intangible assets, net
22,979
—
Interest rate caplets, net of current
11,364
—
Other assets
8,978
3,043
Total noncurrent assets
351,713
215,827
Total assets
$
862,769
$
616,073
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of debt
$
23,466
$
17,500
Current portion of route and customer
acquisition costs payable
1,487
2,079
Accrued location gaming expense
7,791
3,969
Accrued state gaming expense
16,605
11,441
Accounts payable and other accrued
expenses
22,302
14,616
Accrued compensation and related
expenses
10,607
8,886
Current portion of consideration
payable
7,647
13,344
Total current liabilities
89,905
71,835
Long-term liabilities:
Debt, net of current maturities
518,566
324,022
Route and customer acquisition costs
payable, less current portion
5,137
3,953
Consideration payable, less current
portion
6,872
12,706
Contingent earnout share liability
23,288
42,831
Other long-term liabilities
3,390
17
Deferred income tax liability
37,021
2,248
Total long-term liabilities
594,274
385,777
Stockholders’ equity:
Preferred Stock, par value of $0.0001;
1,000,000 shares authorized; 0 shares issued and outstanding at
December 31, 2022 and December 31, 2021
—
—
Class A-1 Common Stock, par value $0.0001;
250,000,000 shares authorized; 94,504,051 shares issued and
86,674,390 shares outstanding at December 31, 2022; 94,111,868
shares issued and 93,410,563 shares outstanding at December 31,
2021
9
9
Additional paid-in capital
194,157
187,656
Treasury stock, at cost
(81,697
)
(8,983
)
Accumulated other comprehensive income
12,240
—
Accumulated earnings (deficit)
53,881
(20,221
)
Total stockholders' equity
178,590
158,461
Total liabilities and stockholders'
equity
$
862,769
$
616,073
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230228006333/en/
Media: Eric Bonach H/Advisors Abernathy 212-371-5999
eric.bonach@h-advisors.global
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