Accel Entertainment, Inc. (NYSE: ACEL) today announced certain
financial and operating results for the second quarter ended June
30, 2023.
Highlights:
- Ended Q2 2023 with 3,655 locations; an increase of 5% compared
to Q2 2022
- Ended Q2 2023 with 23,759 gaming terminals; an increase of 7%
compared to Q2 2022
- Revenue of $292.6 million for Q2 2023, an increase of 28%
compared to Q2 2022
- Net income of $10.0 million for Q2 2023; a decrease of 56%
compared to Q2 2022 primarily attributable to the $4.8 million loss
on the change in fair value of the contingent earnout shares in Q2
2023 compared to the $5.7 million gain in Q2 2022
- Adjusted EBITDA of $46.6 million for Q2 2023; an increase of 9%
compared to Q2 2022 primarily due to the acquisition of Century and
Illinois same stores sales growth of 0.4%
- Q2 2023 ended with $285 million of net debt; an increase of 1%
compared to Q2 2022
- Repurchased approximately $8 million of Accel Class A-1 common
stock in Q2 2023
- Reached a settlement to resolve the disciplinary complaint with
the Illinois Gaming Board for $1.1 million, which is included in
Net income and Adjusted EBITDA in our Q2 2023 results
Accel CEO Andy Rubenstein commented, “We are pleased to deliver
another record-breaking quarter and I am excited by our future
growth opportunities. Despite uncertain economic times, our
revenues continue to grow organically outside of acquisitions. As
we look beyond Illinois, we have greater visibility on new ways to
further extend our position as a national leader in distributed
gaming. We expect our strong balance sheet and locally focused
business model will offer what we believe is one of the best
returns in gaming.”
Condensed Consolidated Statements of
Operations and Other Data
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2023
2022
2023
2022
Total net revenue
$
292,647
$
227,869
$
585,855
$
424,760
Operating income
29,164
27,315
56,836
48,522
Income before income tax expense
16,085
29,246
31,267
49,869
Net income
9,983
22,464
19,165
38,252
Other Financial Data:
Adjusted EBITDA(1)
46,612
42,716
92,730
77,958
Adjusted net income (2)
20,435
22,516
41,499
40,121
(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; and income tax expense. 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.”
Net Revenues
(in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net revenues by state:
Illinois
$
215,947
$
205,962
$
435,790
$
400,821
Montana
39,275
10,825
75,726
10,825
Nevada
29,869
8,920
59,830
8,920
Other
7,556
2,162
14,509
4,194
Total net revenues
$
292,647
$
227,869
$
585,855
$
424,760
Key Business Metrics
Locations (1)
As of June 30,
2023
2022
Illinois
2,690
2,572
Montana
610
585
Nevada
355
332
Total locations
3,655
3,489
Terminals (1)
As of June 30,
2023
2022
Illinois
14,767
13,801
Montana
6,210
5,742
Nevada
2,782
2,585
Total terminals
23,759
22,128
(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.
Condensed Consolidated Statements of Cash Flows Data
Six Months Ended June
30,
(in thousands)
2023
2022
Net cash provided by operating
activities
$
63,845
$
41,211
Net cash used in investing activities
(16,245
)
(137,267
)
Net cash (used in) provided by financing
activities
(38,279
)
117,438
Non-GAAP Financial Measures
Three Months Ended June
30,
Six Months Ended June
30,
(in thousands)
2023
2022
2023
2022
Net income
$
9,983
$
22,464
$
19,165
$
38,252
Adjustments:
Amortization of intangible assets and
route and customer acquisition costs (1)
5,284
3,574
10,526
7,122
Stock-based compensation (2)
2,567
2,281
4,255
3,886
Loss (gain) on change in fair value of
contingent earnout shares (3)
4,836
(5,722
)
9,438
(9,139
)
Other expenses, net (4)
73
2,232
3,324
4,788
Tax effect of adjustments (5)
(2,308
)
(2,313
)
(5,209
)
(4,788
)
Adjusted net income
$
20,435
$
22,516
$
41,499
$
40,121
Depreciation and amortization of property
and equipment
9,446
6,598
18,509
12,439
Interest expense, net
8,243
3,791
16,131
7,792
Emerging markets (6)
78
716
(720
)
1,201
Income tax expense
8,410
9,095
17,311
16,405
Adjusted EBITDA
$
46,612
$
42,716
$
92,730
$
77,958
(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. We amortize 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 we do 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 performance-based restricted
stock units.
(3)
Loss (gain) 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, and (iii) 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 we have installed or acquired at least 500 gaming
terminals in the jurisdiction, or when 24 months have elapsed from
the date we first install or acquire gaming terminals in the
jurisdiction, whichever occurs first. We currently view Iowa and
Pennsylvania as emerging markets. Prior to April 2023, Nebraska was
considered an emerging market. Prior to July 2022, Georgia was
considered an emerging market.
Reconciliation of Debt to Net
Debt
As of June 30,
(in thousands)
2023
2022
Debt, net of current maturities
$
489,721
$
478,635
Plus: Current maturities of debt
28,472
23,460
Less: Cash and cash equivalents
(233,434
)
(220,168
)
Net debt
$
284,759
$
281,927
Conference Call
Accel will host an investor conference call on August 3, 2023 at
4:30 p.m. Central Time (5:30 p.m. Eastern Time) to discuss these
operating and financial results. Interested parties may join the
live webcast by registering at
https://www.netroadshow.com/events/login?show=b22ebdaa&confId=52872.
Registering in advance of the call will provide listeners with a
personalized link to view the webcast and an individual dial-in for
the call. This registration link to the live webcast will also be
available on Accel’s investor relations website, as well as a
replay of the webcast following completion of the call:
ir.accelentertainment.com.
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 markets Accel serves.
Accel’s business consists of the installation, maintenance and
operation of gaming terminals, redemption devices that disburse
winnings and contain automated teller machine (“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; unfavorable
macroeconomic conditions or decreased discretionary spending due to
other factors such as increased interest rates, increased
inflation, actual or perceived instability in the U.S. and global
banking systems, high fuel rates, recessions, epidemics or other
public health issues, 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.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenues:
Net gaming
$
277,551
$
218,423
$
556,931
$
406,885
Amusement
5,630
4,693
12,428
9,683
Manufacturing
4,430
919
6,552
919
ATM fees and other
5,036
3,834
9,944
7,273
Total net revenues
292,647
227,869
585,855
424,760
Operating expenses:
Cost of revenue (exclusive of depreciation
and amortization expense shown below)
202,306
154,666
405,860
287,286
Cost of manufacturing goods sold
(exclusive of depreciation and amortization expense shown
below)
2,154
765
3,562
765
General and administrative
44,220
32,719
87,238
63,838
Depreciation and amortization of property
and equipment
9,446
6,598
18,509
12,439
Amortization of intangible assets and
route and customer acquisition costs
5,284
3,574
10,526
7,122
Other expenses, net
73
2,232
3,324
4,788
Total operating expenses
263,483
200,554
529,019
376,238
Operating income
29,164
27,315
56,836
48,522
Interest expense, net
8,243
3,791
16,131
7,792
Loss (gain) on change in fair value of
contingent earnout shares
4,836
(5,722
)
9,438
(9,139
)
Income before income tax
expense
16,085
29,246
31,267
49,869
Income tax expense
6,102
6,782
12,102
11,617
Net income
$
9,983
$
22,464
$
19,165
$
38,252
Earnings per common share:
Basic
$
0.12
$
0.24
$
0.22
$
0.41
Diluted
0.11
0.24
0.22
0.41
Weighted average number of shares
outstanding:
Basic
86,184
92,328
86,529
92,484
Diluted
86,820
93,001
86,971
93,195
ACCEL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except par value and share
amounts)
June 30,
December 31
2023
2022
Assets
(Unaudited)
Current assets:
Cash and cash equivalents
$
233,434
$
224,113
Accounts receivable, net
9,713
11,166
Prepaid expenses
8,009
7,407
Inventories
7,313
6,941
Income taxes receivable
909
538
Interest rate caplets
9,603
8,555
Investment in convertible notes
—
32,065
Other current assets
11,930
8,427
Total current assets
280,911
299,212
Property and equipment, net
235,682
211,844
Noncurrent assets:
Route and customer acquisition costs,
net
18,303
18,342
Location contracts acquired, net
181,960
189,343
Goodwill
101,554
100,707
Other intangible assets, net
21,761
22,979
Interest rate caplets, net of current
9,677
11,364
Other assets
13,446
8,978
Total noncurrent assets
346,701
351,713
Total assets
$
863,294
$
862,769
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of debt
$
28,472
$
23,466
Current portion of route and customer
acquisition costs payable
1,497
1,487
Accrued location gaming expense
6,264
7,791
Accrued state gaming expense
16,470
16,605
Accounts payable and other accrued
expenses
24,513
22,302
Accrued compensation and related
expenses
8,039
10,607
Current portion of consideration
payable
7,497
7,647
Total current liabilities
92,752
89,905
Long-term liabilities:
Debt, net of current maturities
489,721
518,566
Route and customer acquisition costs
payable, less current portion
4,566
5,137
Consideration payable, less current
portion
5,945
6,872
Contingent earnout share liability
32,726
23,288
Other long-term liabilities
5,514
3,390
Deferred income tax liability, net
43,322
37,021
Total long-term liabilities
581,794
594,274
Stockholders’ equity:
Preferred Stock, par value of $0.0001;
1,000,000 shares authorized; 0 shares issued and outstanding at
June 30, 2023 and December 31, 2022
—
—
Class A-1 Common Stock, par value $0.0001;
250,000,000 shares authorized; 94,799,278 shares issued and
85,605,725 shares outstanding at June 30, 2023; 94,504,051 shares
issued and 86,674,390 shares outstanding at December 31, 2022
9
9
Additional paid-in capital
197,690
194,157
Treasury stock, at cost
(94,133
)
(81,697
)
Accumulated other comprehensive income
12,136
12,240
Accumulated earnings
73,046
53,881
Total stockholders' equity
188,748
178,590
Total liabilities and stockholders'
equity
$
863,294
$
862,769
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Media: Eric Bonach H/Advisors Abernathy 212-371-5999
eric.bonach@h-advisors.global
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