8-K
Accel Entertainment, Inc. (ACEL)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 2021
ACCEL ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-38136 | 98-1350261 | |||
|---|---|---|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) | |||
| 140 Tower Drive | |||||
| Burr Ridge | , | Illinois | 60527 | ||
| (Address of principal executive offices) | (Zip Code) |
(630) 972-2235
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A-1 common stock, par value $0.0001 per share | ACEL | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 4, 2021, the Company issued a press release announcing its financial and operating results for the second quarter ended June 30, 2021. Copies of the Company’s press release and investor presentation are attached and furnished herewith as Exhibits 99.1 and 99.2 to this Form 8-K and are incorporated herein by reference.
Information in this report (including Exhibits 99.1 and 99.2) furnished pursuant to Item 2.02 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section.
The Company announces material information to the public through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, and the Company’s investor relations website (https:// ir.accelentertainment.com) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit<br>Number | Description |
|---|---|
| 99.1 | Press Release dated August 4, 2021 |
| 99.2 | Accel Investor Presentation - Second Quarter 2021 Earnings Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ACCEL ENTERTAINMENT, INC. | ||
|---|---|---|
| Date: August 4, 2021 | By: | /s/ Brian Carroll |
| Brian Carroll | ||
| Chief Financial Officer |
3
Document
Accel Entertainment Announces Q2 2021 Operating Results
Chicago, IL – August 4, 2021 – Accel Entertainment, Inc. (NYSE: ACEL) today announced certain financial and operating results for the second quarter ended June 30, 2021.
Highlights:
•Q2 2021 ended with 2,527 locations; an increase of 8% compared to Q2 2020
•Q2 2021 ended with 13,177 video gaming terminals (“VGTs”); an increase of 19% compared to Q2 2020
•Revenue of $202.0 million for Q2 2021, the highest revenue quarter in Accel's history
•Revenue per location per day increased 35% vs Q2 2019
•Net Income of $12.4 million for Q2 2021
•Adjusted EBITDA of $43.0 million for Q2 2021, the highest Adjusted EBITDA quarter in Accel's history
•Q2 2021 ended with $166.5 million of net debt; a decrease of 33% compared to Q2 2020
•Closing of Century Gaming acquisition now estimated to be first half of 2022 due to the backlog of licensing applications
2021 Revised Guidance:
Due to the uncertainty of the COVID-19 delta variant, guidance conservatively raised to:
•End 2021 with an estimated 2,590 – 2,615 locations
•End 2021 with an estimated 13,555 – 13,680 VGTs
•2021 Revenue now estimated to be $700 - $725 million
•2021 Adjusted EBITDA[*] now estimated to be $133 - $138 million
•2021 capital expenditures still estimated to be $20 - $25 million of cash spend
•End 2021 with $123 - $128 million of net debt
Revised guidance includes the January 2021 shutdown and assumes no acquisitions.
Accel Entertainment CEO Andy Rubenstein commented, “We are pleased to report exceptional results for the second quarter of 2021. We delivered both record-breaking Adjusted EBITDA and the strongest revenue quarter in Accel’s history. These results were supported by the completion of higher bet limit software upgrades, sixth VGT installations, as well as the economic recovery in the state of Illinois. We feel confident that the revenue we saw at the end of the second quarter should be sustainable, driven by the various initiatives we put in place over the past several quarters. These record results are a further proof point that our asset-light and hyper-local business model is highly effective and has well-positioned Accel for the long-term."
| Condensed Consolidated Statements of Operations and Other Data | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||
| Total revenues | $ | 201,974 | $ | 379 | $ | 349,043 | $ | 106,843 | |||
| Operating income (loss) | 24,927 | (23,840) | 34,482 | (21,696) | |||||||
| Income (loss) before income tax (benefit) expense | 18,369 | (51,823) | 21,783 | (3,919) | |||||||
| Net income (loss) | 12,445 | (46,768) | 13,946 | 1,275 | |||||||
| Other Financial Data: | |||||||||||
| Adjusted EBITDA(1) | 42,983 | (8,745) | 68,796 | 6,095 | |||||||
| Adjusted net income (loss) (2) | 25,732 | (13,593) | 36,789 | (7,402) | (1) | Adjusted EBITDA is defined as net income (loss) plus amortization of route and customer acquisition costs and location contracts acquired; change in fair value of contingent earnout shares; change in the fair value of warrants; stock-based compensation expense; other expenses, net; tax effect of adjustments; depreciation and amortization of property and equipment; interest expense; and provision for income taxes. For additional information on Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA, see “Non-GAAP Financial Measures—Adjusted net income (loss) and Adjusted EBITDA.” | |||||
| --- | --- | ||||||||||
| (2) | Adjusted net income (loss) is defined as net income (loss) plus amortization of route and customer acquisition costs and location contracts acquired; change in fair value of contingent earnout shares; change in the fair value of warrants; stock-based compensation expense; other expenses, net; and tax effect of adjustments. For additional information on Adjusted net income (loss) and a reconciliation of net income (loss) to Adjusted net income (loss), see "Non-GAAP Financial Measures— Adjusted net income (loss) and Adjusted EBITDA.” | Key Metrics | |||||||||
| --- | --- | --- | |||||||||
| As of June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Licensed establishments (1) | 2,527 | 2,335 | |||||||||
| Video gaming terminals (2) | 13,177 | 11,108 | |||||||||
| Average remaining contract term (years) (3) | 6.8 | 6.8 | |||||||||
| June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Location hold-per-day – for the three months ended(4) (in whole $) | $855 | $— | |||||||||
| Location hold-per-day – for the six months ended(4) (in whole $) | $824 | $572 | |||||||||
| (1) | Based on Scientific Games International third-party terminal operator portal data which is updated at the end of each gaming day and includes licensed establishments that may be temporarily closed but still connected to the central system. This metric is utilized by Accel to continually monitor growth from existing locations, organic openings, acquired locations, and competitor conversions. | ||||||||||
| --- | --- | ||||||||||
| (2) | Based on Scientific Games International third-party terminal operator portal data which is updated at the end of each gaming day and includes VGTs that may be temporarily shut off but still connected to the central system. This metric is utilized by Accel to continually monitor growth from existing locations, organic openings, acquired locations, and competitor conversions. | ||||||||||
| (3) | Calculated by determining the average expiration date of all outstanding contracts, and then subtracting the applicable measurement date. The IGB limited the length of contracts entered into after February 2, 2018 to a maximum of eight years with no automatic renewals. | ||||||||||
| (4) | Calculated by dividing the difference between cash deposited in all VGTs at each licensed establishment and tickets issued to players at each licensed establishment by the number of locations in operation each day during the period being measured. Then divide the calculated amount by the number of operating days in such period. There were no gaming days for the three months ended June 30, 2020, due to the IGB mandated COVID-19 shutdown. Location hold per-day for the six months ended June 30, 2021 is computed based on 163-eligible days of gaming (excludes 18 non-gaming days due to the IGB mandated COVID-19 shutdown). Location hold-per-day for the six months ended June 30, 2020 is computed based on 76-eligible days of gaming (excludes 106 non-gaming days due to the IGB mandated COVID-19 shutdown). | ||||||||||
| Condensed Consolidated Statements of Cash Flows Data | |||||||||||
| --- | --- | --- | --- | --- | |||||||
| Six Months Ended June 30, | |||||||||||
| (in thousands) | 2021 | 2020 | |||||||||
| Net cash provided by (used in) operating activities | $ | 54,158 | $ | (17,284) | |||||||
| Net cash used in investing activities | (13,758) | (4,002) | |||||||||
| Net cash provided by financing activities | 3,657 | 44,717 | |||||||||
| Non-GAAP Financial Measures | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||
| Net income (loss) | $ | 12,445 | $ | (46,768) | $ | 13,946 | $ | 1,275 | |||
| Adjustments: | |||||||||||
| Amortization of route and customer acquisition costs and location contracts acquired (1) | 6,162 | 5,565 | 12,268 | 11,130 | |||||||
| Stock-based compensation (2) | 2,148 | 1,327 | 3,741 | 2,387 | |||||||
| Loss (gain) on change in fair value of contingent earnout shares (3) | 3,182 | 7,174 | 5,979 | (10,232) | |||||||
| Loss (gain) on change in fair value of warrants(4) | — | 18,320 | — | (14,283) | |||||||
| Other expenses, net (5) | 2,687 | 3,132 | 4,740 | 4,336 | |||||||
| Tax effect of adjustments (6) | (892) | (2,343) | (3,885) | (2,015) | |||||||
| Adjusted net income (loss) | $ | 25,732 | $ | (13,593) | $ | 36,789 | $ | (7,402) | |||
| Depreciation and amortization of property and equipment | 6,313 | 5,071 | 12,302 | 9,938 | |||||||
| Interest expense, net | 3,376 | 2,489 | 6,720 | 6,738 | |||||||
| Emerging markets (7) | 746 | — | 1,263 | — | |||||||
| Income tax expense (benefit) | 6,816 | (2,712) | 11,722 | (3,179) | |||||||
| Adjusted EBITDA | $ | 42,983 | $ | (8,745) | $ | 68,796 | $ | 6,095 |
(1) Route and customer acquisition costs consist of upfront cash payments and future cash payments to third-party sales agents to acquire the licensed video gaming establishments that are not connected with a business combination. 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 10 years. “Amortization of route and customer acquisition costs and location contracts acquired” aggregates the non-cash amortization charges relating to upfront route and customer acquisition cost payments and location contracts acquired.
(2) Stock-based compensation consists of options, restricted stock units and warrants.
(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) Loss (gain) on change in fair value of warrants represents a non-cash fair value adjustment at each reporting period end related to the value of these warrants.
(5) Other expenses, net consists of (i) non-cash expenses including the remeasurement of contingent consideration liabilities, (ii) non-recurring expenses relating to lobbying efforts and legal expenses in Pennsylvania and lobbying efforts in Missouri, (iii) non-recurring costs associated with COVID-19 and (iv) other non-recurring expenses.
(6) Calculated by excluding the impact of the non-GAAP adjustments from the current period tax provision calculations.
(7) 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.
| Reconciliation of Debt to Net Debt | ||||
|---|---|---|---|---|
| As of June 30, | ||||
| (in thousands) | 2021 | 2020 | ||
| Debt, net of current maturities | $ | 326,775 | $ | 380,740 |
| Plus: Current maturities of debt | 18,250 | 18,250 | ||
| Less: Cash and cash equivalents | (178,508) | (148,834) | ||
| Net Debt | $ | 166,517 | $ | 250,156 |
Conference Call
Accel will host an investor conference call on August 5, 2021 at 11 a.m. Central (12 p.m. Eastern) to discuss these operating and financial results. Interested parties may join the live webcast by registering at http://www.directeventreg.com/registration/event/8840878. 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 Illinois market. Accel’s business consists of the installation, maintenance and operation of VGTs, 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 2021 guidance, including with respect to the duration and impact of the COVID-19 crisis (including expected operating expenses related thereto), potential acquisitions or strategic alliances, and our estimates of number of VGTs, locations, revenues, Adjusted EBITDA, capital expenditures, and Net Debt. 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: 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 March 16, 2020 and June 30, 2020 and between November 19, 2020 and January 23, 2021, which suspensions could be reinstated; 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 licensed establishment partners and create strong and sustained player appeal; Accel’s dependence on relationships with key manufacturers, developers and third parties to obtain VGTs, 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 VGTs and by the slow growth of new gaming jurisdictions; Accel’s heavy dependency on its ability to win, maintain and renew contracts with licensed establishment partners; unfavorable economic conditions or decreased discretionary spending due to other factors such as epidemics or other public health issues (including COVID-19), terrorist activity or threat thereof, civil unrest or other economic 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 the 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 sections entitled “Risk Factors” in the Quarterly Reports on Form 10-Q and 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 Quarterly Reports on Form 10-Q and 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 (loss), and Net Debt. Adjusted EBITDA, Adjusted net income (loss), 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 (loss), 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.
Although Accel excludes amortization of route and customer acquisition costs and location contracts acquired from Adjusted EBITDA and Adjusted net income (loss), Accel believes that it is important for investors to understand that these route, customer and location contract acquisitions contribute to revenue
generation. Any future acquisitions may result in amortization of route and customer acquisition costs and location contracts acquired.
Adjusted EBITDA, Adjusted net income (loss), and Net Debt are not recognized terms under GAAP. These non-GAAP financial measures excludes 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.
[*] Although we provide guidance for Adjusted EBITDA, we are not able to provide guidance for net income, the most directly comparable GAAP measure. Certain elements of the composition of GAAP net income, including stock-based compensation expenses, are difficult to predict and estimate, and are often dependent on future events which may be uncertain or outside of our control. These elements make it impractical for us to provide guidance on net income or to reconcile our Adjusted EBITDA guidance to net income without unreasonable efforts. For the same reason, we are unable to address the probable significance of the unavailable information.
Media Contact:
Eric Bonach
Abernathy MacGregor
212-371-5999
ejb@abmac.com
ACCEL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| (In thousands, except per share amounts) | Three Months Ended<br>June 30, | Six Months Ended<br>June 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenues: | (As Restated) | (As Restated) | ||||||
| Net gaming | $ | 194,434 | $ | — | $ | 334,898 | $ | 101,575 |
| Amusement | 4,279 | 260 | 8,328 | 3,091 | ||||
| ATM fees and other revenue | 3,261 | 119 | 5,817 | 2,177 | ||||
| Total net revenues | 201,974 | 379 | 349,043 | 106,843 | ||||
| Operating expenses: | ||||||||
| Cost of revenue (exclusive of depreciation and amortization expense shown below) | 135,772 | 530 | 234,663 | 71,239 | ||||
| General and administrative | 26,113 | 9,921 | 50,588 | 31,896 | ||||
| Depreciation and amortization of property and equipment | 6,313 | 5,071 | 12,302 | 9,938 | ||||
| Amortization of route and customer acquisition costs and location contracts acquired | 6,162 | 5,565 | 12,268 | 11,130 | ||||
| Other expenses, net | 2,687 | 3,132 | 4,740 | 4,336 | ||||
| Total operating expenses | 177,047 | 24,219 | 314,561 | 128,539 | ||||
| Operating income (loss) | 24,927 | (23,840) | 34,482 | (21,696) | ||||
| Interest expense, net | 3,376 | 2,489 | 6,720 | 6,738 | ||||
| Loss (gain) on change in fair value of contingent earnout shares | 3,182 | 7,174 | 5,979 | (10,232) | ||||
| Loss (gain) on change in fair value of warrants | — | 18,320 | — | (14,283) | ||||
| Income (loss) before income tax expense (benefit) | 18,369 | (51,823) | 21,783 | (3,919) | ||||
| Income tax expense (benefit) | 5,924 | (5,055) | 7,837 | (5,194) | ||||
| Net income (loss) | $ | 12,445 | $ | (46,768) | $ | 13,946 | $ | 1,275 |
| Net income (loss) per common share: | ||||||||
| Basic | $ | 0.13 | $ | (0.60) | $ | 0.15 | $ | 0.02 |
| Diluted | 0.13 | (0.60) | 0.15 | 0.01 | ||||
| Weighted average number of shares outstanding: | ||||||||
| Basic | 93,617 | 78,317 | 93,452 | 78,161 | ||||
| Diluted | 94,668 | 78,317 | 94,382 | 79,079 | ||||
| Comprehensive income (loss) | ||||||||
| Net income (loss) | 12,445 | (46,768) | 13,946 | 1,275 | ||||
| Unrealized gain on investment in convertible notes (net of income taxes of $2,073 and $2,260, respectively) | 5,204 | — | 5,673 | — | ||||
| Comprehensive income (loss) | $ | 17,649 | $ | (46,768) | $ | 19,619 | $ | 1,275 |
ACCEL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| (In thousands, except par value and share amounts) | June 30, | December 31 | ||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Assets | (Unaudited) | (As Restated) | ||
| Current assets: | ||||
| Cash and cash equivalents | $ | 178,508 | $ | 134,451 |
| Prepaid expenses | 6,087 | 5,549 | ||
| Income taxes receivable | — | 3,341 | ||
| Other current assets | 11,216 | 8,643 | ||
| Total current assets | 195,811 | 151,984 | ||
| Property and equipment, net | 144,688 | 143,565 | ||
| Other noncurrent assets: | ||||
| Route and customer acquisition costs, net | 15,555 | 15,251 | ||
| Location contracts acquired, net | 158,051 | 167,734 | ||
| Goodwill | 45,754 | 45,754 | ||
| Investment in convertible notes | 38,063 | 30,129 | ||
| Deferred income tax asset | — | 3,824 | ||
| Other assets | 2,926 | 2,000 | ||
| Total other noncurrent assets | 260,349 | 264,692 | ||
| Total assets | $ | 600,848 | $ | 560,241 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Current maturities of debt | $ | 18,250 | $ | 18,250 |
| Current portion of route and customer acquisition costs payable | 2,030 | 1,608 | ||
| Accrued location gaming expense | 2,375 | — | ||
| Accrued state gaming expense | 10,677 | — | ||
| Accounts payable and other accrued expenses | 10,702 | 23,666 | ||
| Accrued compensation and related expenses | 7,328 | 5,853 | ||
| Current portion of consideration payable | 6,646 | 3,013 | ||
| Total current liabilities | 58,008 | 52,390 | ||
| Long-term liabilities: | ||||
| Debt, net of current maturities | 326,775 | 321,891 | ||
| Route and customer acquisition costs payable, less current portion | 3,618 | 4,064 | ||
| Consideration payable, less current portion | 19,102 | 20,943 | ||
| Contingent earnout share liability | 39,049 | 33,069 | ||
| Warrant liability | 13 | 13 | ||
| Deferred income tax liability | 2,367 | — | ||
| Total long-term liabilities | 390,924 | 379,980 | ||
| Stockholders’ equity : | ||||
| Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020 | — | — | ||
| Class A-1 Common Stock, par value $0.0001; 250,000,000 shares authorized; 93,660,753 shares issued and outstanding at June 30, 2021; 93,379,508 shares issued and outstanding at December 31, 2020 | 9 | 9 | ||
| Additional paid-in capital | 183,975 | 179,549 | ||
| Accumulated other comprehensive income | 5,766 | 93 | ||
| Accumulated deficit | (37,834) | (51,780) | ||
| Total stockholders' equity | 151,916 | 127,871 | ||
| Total liabilities and stockholders' equity | $ | 600,848 | $ | 560,241 |
9
accel2q21resultspresenta
Second Quarter 2021 Earnings Presentation August 2021
Important Information Forward-Looking Statements This presentation 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 presentation are forward-looking statements, including, but not limited to, statements regarding our strategy, prospects, plans, objectives, future operations, future revenue and earnings, projected margins and expenses, markets for our services, potential acquisitions or strategic alliances, financial position, and liquidity and anticipated cash needs and availability. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions or the negatives thereof are intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. 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: the existing and potential future adverse impact of the COVID-19 pandemic on Accel Entertainment, Inc.’s (the “Company” or “Accel”) business, operations and financial condition, including as a result the suspensions of all video gaming terminal operations by the Illinois Gaming Board between March 16, 2020 and June 30, 2020 and between November 19, 2020 and January 23, 2021, which suspensions could be reinstated; 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 licensed establishment 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 VGTs and by the slow growth of new gaming jurisdictions; Accel’s heavy dependency on its ability to win, maintain and renew contracts with licensed establishment partners; unfavorable economic conditions or decreased discretionary spending due to other factors such as epidemics or other public health issues (including COVID-19), terrorist activity or threat thereof, civil unrest or other economic 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 presentation are based on our current expectations and beliefs concerning future developments and their potential effects on the 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 sections entitled “Risk Factors” in the Quarterly Reports on Form 10-Q and 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 presentation or future quarterly reports, press releases or company statements will not be realized. In addition, the inclusion of any statement in this presentation 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.” These and other factors could cause our results to differ materially from those expressed in this presentation. Industry and Market Data Unless otherwise indicated, information contained in this presentation concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity, and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources, and on our knowledge of the markets for our services. This information includes a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. In addition, projections, assumptions, and estimates of our future performance and the future performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the Quarterly Reports on Form 10-Q and 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 results to differ materially from those expressed in the estimates made by third parties and by us. Use of Non-GAAP Financial Measures This presentation includes non-GAAP financial measures, including Adjusted EBITDA and Net Debt. Adjusted EBITDA is defined as net (loss) income plus amortization of route and customer acquisition costs and location contracts acquired; change in fair value of contingent earnout shares; change in fair value of warrants; stock-based compensation expense; other expenses, net; tax effect of adjustments; depreciation and amortization of property and equipment; emerging markets; interest expense; and provision for income taxes. Net Debt is defined as Debt, net of current maturities plus Current maturities of debt less Cash and cash equivalents. Management believes that these non-GAAP measures of financial results enhance the understanding of Accel’s underlying drivers of profitability and trends in Accel’s business and facilitate company-to-company and period-to period comparisons, because these non-GAAP financial measures exclude the effects of certain non-cash items or represent certain nonrecurring items that are unrelated to core performance. 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 and to evaluate Accel’s ability to fund capital expenditures, service debt obligations and meet working capital requirements. See the slide entitled “Non-GAAP to GAAP Reconciliation” on page 10 for additional information. 2
Accel at a Glance 1. Calculated as Net Video Gaming Revenue in the period divided by the number of operational days. For the year ended December 31, 2020, there was 217 gaming days. For the six months ended June 30, 2021, there was approximately 163 gaming days. 2. Voluntary contract renewal rate for the 3 years ending December 31, 2020. 3. Net Debt is a non-GAAP financial measures that may not be comparable to other similarly titled measures of other companies. Accel does not consider this non-GAAP measure in isolation or as an alternative to similar financial measures determined in accordance with GAAP. For more information with respect to these Non-GAAP financial measures, see page 2 “Use of Non-GAAP Financial Measures,” and for a reconciliation of each of these measures to their most directly comparable GAAP measure, see page 10 "Non-GAAP to GAAP Reconciliation.” Strong Track Record of Growth Disciplined Stewards of Capital As of June 30, 2021, Accel owns and operates 13,177 Video Gaming Terminals (“VGTs”) across 2,527 third-party licensed establishments in Illinois. Accel operates more VGTs than all 10 Illinois casinos combined Average Daily Net Video Gaming Revenue(1) ($ in thousands) 8 Year contracts Average residual contract length: 6.8 years 99% Contract renewal rate(2) Strong backlog of contracted locations waiting to go-live High Quality Service Company in Gaming Vertical Contracted, Recurring Revenue 3 Balance sheet strength Conservative net leverage $167mm Net Debt(3) Recent gaming legislation provided significant embedded opportunity for additional growth $256 $353 $458 $658 $882 $1,125 $1,383 $2,050 2014 2015 2016 2017 2018 2019 2020 2021 YTD
Recent Highlights • Q2 2021 Revenue and Adjusted EBITDA were the highest in Accel’s history − Revenue per location per day increased 35% vs Q2 2019 • Guidance increased based on Q2 2021’s strong results and the strong start to Q3 2021 • All Illinois COVID regions currently in phase 5 – no restrictions on gaming or indoor dining • Closing of Century Gaming acquisition now estimated to be first half of 2022 due to the backlog of licensing applications 4
Q2 2021 Results 5 1. 2021 guidance includes the January 2021 shutdown and assumes no M&A 2. Adjusted EBITDA is a non-GAAP financial measures that may not be comparable to other similarly titled measures of other companies. Accel does not consider this non-GAAP measure in isolation or as an alternative to similar financial measures determined in accordance with GAAP. For more information with respect to these Non-GAAP financial measures, see page 2 “Use of Non-GAAP Financial Measures,” and for a reconciliation of each of these measures to their most directly comparable GAAP measure, see page 10 "Non-GAAP to GAAP Reconciliation.” 3. Presented as cash spend. 4. Net Debt is a non-GAAP financial measures that may not be comparable to other similarly titled measures of other companies. Accel does not consider this non-GAAP measure in isolation or as an alternative to similar financial measures determined in accordance with GAAP. For more information with respect to these Non-GAAP financial measures, see page 2 “Use of Non-GAAP Financial Measures,” and for a reconciliation of each of these measures to their most directly comparable GAAP measure, see page 10 "Non-GAAP to GAAP Reconciliation.” $ in millions Q2 2020 (0 gaming days) Q2 2021 % Change 2021 Guidance(1) Locations 2,335 2,527 +8% 2,590 – 2,615 VGTs 11,108 13,177 +19% 13,555 – 13,680 Revenue $0 $202 n/a $700 - $725 Adj EBITDA(2) ($9) $43 +592% $133 - $138 CapEx(3) $0 $9 n/a $20 - $25 Net Debt(4) $250 $167 -33% $123 - $128
$15 ($9) $23 $5 $26 $43 Q1 Q2 Q3 Q4 2020 2021 $106 – $135 $74 $147 $202 Q1 Q2 Q3 Q4 2020 2021 Accel Quarterly KPIs 1. Hold-per-day (HPD) is calculated by dividing the difference between cash deposited in all VGTs at each licensed establishment and tickets issued to players at each licensed establishment by the number of locations in operation each day during the period being measured. Then divide the calculated amount by the number of operating days in such period. Hold per day for the three months ended March 31, 2020, December 31, 2020, and March 31, 2021 are computed based on 76, 50, and 72, respectively, eligible gaming days (excludes 15, 42, and 18, respectively, non-gaming days due to the IGB mandated COVID-19 shutdowns). 2. Adjusted EBITDA is a non-GAAP financial measure that may not be comparable to other similarly titled measures of other companies. Accel does not consider this non-GAAP measure in isolation or as an alternative to similar financial measures determined in accordance with GAAP. For more information with respect to these Non-GAAP financial measures, see page 2 “Use of Non-GAAP Financial Measures,” and for a reconciliation of each of these measures to their most directly comparable GAAP measure, see page 10 "Non-GAAP to GAAP Reconciliation.” End of Period Live Locations / VGTs (#) Location Hold per Day(1) ($) Revenue ($mm) Adjusted EBITDA(2) ($mm) Open Jan 1 – Mar. 16 Open Jan 1 - Mar 16 Open Jan 19 - Mar 31 Open Jan 1 - Mar 16 Open Jan 19 - Mar 31 Open Oct 1 - Nov 19 6 11,108 11,597 12,247 12,720 13,177 2,335 2,363 2,435 2,470 2,527 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 VGTs Locations $572 – $596 $583 $784 $855 Q1 Q2 Q3 Q4 2020 2021 Open Oct 1 - Nov 19
Regulatory Update 7 Illinois: 6th VGT & Increased Bet Limit Software • Legislation allows for the addition of a 6th machine at each location, and up to 10 total machines at certain qualified truck stops • Legislation increases the max bet from $2 to $4, and increases the max payout from $500 to $1,199 • 6th VGT and increased bet limit software installations complete • Location revenue increased 30% - 35% Georgia Expansion • Currently allows coin- operated skill-based games, primarily in convenience stores • On May 20th, Accel purchased Island Games, Inc. a southern Georgia operator with 30 locations • As of July 31st, Accel had ~60 live locations • Georgia Lottery analyzing results of single-load, Visa prepaid card as a redemption option pilot program Pennsylvania Legislation • Senate is expected to reintroduce legislation to expand video gaming to bars, taverns, veteran, fraternal, and other establishments in Pennsylvania during the current session Missouri Legislation • On April 27th, Senate Bill 98 was debated on the Senate floor and defeated by a narrow margin • Accel is working with other stakeholders to garner support to legalize video gaming in preparation for the 2022 legislative session Virginia Legislation • As of July 1st, unregulated games were illegal • Hearings to introduce regulated gaming expected to be held in Q4 2021
Historical Financial Summary 8 $ in millions 1. Cost of Revenue includes Illinois state gaming taxes, Scientific Gaming revenue sharing, Location revenue sharing, ATM and amusement commissions payable to locations, ATM and amusement fees, and licenses and permits for the operation of VGTs and other equipment. 2. Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures that may not be comparable to other similarly titled measures of other companies. Accel does not consider these non-GAAP measures in isolation or as an alternative to similar financial measures determined in accordance with GAAP. For more information with respect to these Non-GAAP financial measures, see page 2 “Use of Non-GAAP Financial Measures,” and for a reconciliation of each of these measures to their most directly comparable GAAP measure, see page 10 "Non-GAAP to GAAP Reconciliation.” 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. Gain (loss) on change in fair value of warrants represents a non-cash fair value adjustment at each reporting period end related to the value of these warrants. Note: Numbers may not total due to rounding. Q2 YTD YoY YoY 2017 2018 2019 2020 2020 2021 Growth 2020 2021 Growth No. of Locations 1,442 1,686 2,312 2,435 2,335 2,527 8% 2,335 2,527 8% No. of VGTs 6,439 7,649 10,499 12,247 11,108 13,177 19% 11,108 13,177 19% Net Video Gaming Revenue 240 322 411 301 -- 194 102 335 230% Other Revenue 8 13 18 16 0 8 1889% 5 14 169% Gross Revenues 248 335 429 316 0 202 53191% 107 349 227% % YoY Growth 43% 35% 28% (26%) 53191% 227% Less: Cost of Revenue(1) (157) (217) (282) (211) (1) (136) 25517% (71) (235) 229% Gross Profit 91 118 147 105 (0) 66 (43942%) 36 114 221% % Margin 37% 35% 34% 33% (40%) 33% 33% 33% Less: G&A Expenses (45) (54) (69) (77) (10) (26) 163% (32) (51) 59% EBITDA 46 63 77 28 (10) 40 (498%) 4 64 1620% Adjusted EBITDA(2) 47 64 80 34 (9) 43 (592%) 6 69 1029% % Margin 19% 19% 19% 11% (2307%) 21% 6% 20% % YoY Growth 36% 25% (57%) (592%) 1029% Less: D&A of Property & Equipment (17) (21) (26) (21) (5) (6) (10) (12) Less: Amortization of Op Routes (10) (15) (18) (23) (6) (6) (11) (12) EBIT 20 28 33 (16) (21) 28 (17) 39 Less: Other Expenses, net (1) (3) (20) (9) (3) (3) (4) (5) Less: Interest Expense, net (8) (10) (13) (14) (2) (3) (7) (7) Less: Income tax benefit (expenses) (2) (4) (5) 17 5 (6) 5 (8) Less: Gain (loss) on change in fair value contingent earnout shares (3) -- -- (10) 8 (7) (3) 10 (6) Less: Gain (loss) on change in fair value of warrants (4) -- -- (21) 13 (18) -- 14 -- Less: Loss on debt extinguishment -- -- (1) -- -- -- -- -- Reported Net Income (Loss) 8 11 (37) (0) (47) 12 1 14 Adjusted Net Income 17 23 23 6 (14) 26 (7) 37 Twelve Months Ended Three Months Ended Six Months Ended December 31, June 30, June 30,
Accel Balance Sheet 9 Note: Numbers may not total due to rounding. $ in millions December 31, 2020 June 30, 2021 Assets Current Assets: Cash and cash equivalents $134 $179 Other current assets $18 $17 Total current assets $152 $196 Property and equipment, net $144 $145 Route and customer acquisition costs, net $15 $16 Location contracts acquired, net $168 $158 Goodwill $46 $46 Investment in convertible notes $30 $38 Deferred income tax asset $4 – Other assets $2 $3 Total assets $560 $601 Liabilities and Stockholders' Equity Current liabilities: Short Term Debt and Current Maturities $18 $18 Accrued state and location gaming expense – $13 Other Current Liabilities $34 $27 Total current liabilities $52 $58 Long-term liabilities: Long-term debt $322 $327 Contingent earnout share liability $33 $39 Other liabilities $25 $25 Total liabilities $432 $449 Total stockholders' equity $128 $152 Total liabilities and stockholders' equity $560 $601
Non-GAAP to GAAP Reconciliation 10 1. Stock-based compensation consists of options, restricted stock units and warrants. 2. 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. 3. Loss (gain) on change in fair value of warrants represents a non-cash fair value adjustment at each reporting period end related to the value of these warrants. 4. 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. 5. Calculated by excluding the impact of the non-GAAP adjustments from the current period tax provision calculations. Note: With respect to Non-GAAP financial measures, see page 2 "Use of Non-GAAP Financial Measures" under Important Information. Numbers may not total due to rounding. $ in millions Standalone Accel 2017 2018 2019 2020 2020 2021 2020 2021 Reported Net Income (Loss) 8 11 (37) (0) (47) 12 1 14 (+) Amortization of Op Routes 10 15 18 23 6 6 11 12 (+) Stock Based Comp(1) 1 0 2 6 1 2 2 4 (+) (Gain) loss on change in fair value of contingent earnout shares (2) – – 10 (8) 7 3 (10) 6 (+) (Gain) loss on change in fair value of warrants(3) – – 21 (13) 18 – (14) – (+) Other Expenses, net 1 3 20 9 3 3 4 5 (+) Tax effect of adjustments(5) (3) (6) (11) (10) (2) (1) (2) (4) Adjusted Net Income 17 23 23 6 (14) 26 (7) 37 (+) D&A of Property & Equipment 17 21 26 21 5 6 10 12 (+) Interest Expense, net 8 10 13 14 2 3 7 7 (+) Emerging Markets(4) – – – 1 – 1 – 1 (+) Income Tax (Benefit) Expense 5 10 17 (7) (3) 7 (3) 12 (+) Loss on debt extinguishment – – 1 – – – – – Adjusted EBITDA 47 64 80 34 (9) 43 6 69 Twelve Months Ended Three Months Ended Six Months Ended December 31, June 30, June 30, March 31, June 30, Sep. 30, Dec. 31, March 31, June 30, Standalone Accel 2020 2020 2020 2020 2021 2021 Reported Net Income (Loss) 48 (47) 7 (9) 2 12 (+) Amortization of Op Routes 6 6 6 6 6 6 (+) Stock Based Comp (1) 1 1 2 1 2 2 (+) (Gain) loss on change in fair value of contingent earnout shares (2) (17) 7 4 (2) 3 3 (+) (Gain) loss on change in fair value of warrants (3) (33) 18 2 (0) – – (+) Other Expenses, net 1 3 1 3 2 3 (+) D&A of Property & Equipment 5 5 5 6 6 6 (+) Interest Expense, net 4 2 3 4 3 3 (+) Emerging Markets (4) – – 0 0 1 1 (+) Income Tax (Benefit) Expense (0) (5) (7) (5) 2 6 (+) Loss on Debt Extinguishment – – – – – – Adjusted EBITDA 15 (9) 23 5 26 43 Three Months Ended Three Months Ended June 30, 2020 2021 Debt, net of current maturities 381 327 (+) Current maturities of debt 18 18 (-) Cash and cash equivalents (149) (179) Net Debt 250 167