Accel Entertainment, Inc 10-Q for FY2020 Q2

Accel Entertainment, Inc. (ACEL)

10-Q 2020-08-06 For: 2020-06-30

Added on April 08, 2026

About this 10-Q

Accel Entertainment, Inc filed this 10-Q on August 6, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $379K; down 99.6% from $104.27M a year earlier
Net loss: $21.27M; compared with net income of $4.33M a year earlier
Diluted EPS: -$0.27; compared with $0.07 a year earlier

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Delaware		98-1350261
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

140 Tower Drive		60527
Burr Ridge,	Illinois
(Address of Principal Executive Offices)		(Zip Code)



Title of Each Class	Trading Symbols	Name of Each Exchange on Which Registered
Class A-1 Common Stock, par value $.0001 per share	ACEL	The New York Stock Exchange



Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒



PART I.	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS	1
	Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2020 and 2019	1
	Condensed Consolidated Balance Sheets at June 30, 2020 (Unaudited) and December31, 2019	2
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and six months ended June 30, 2020 and 2019	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2020 and 2019	4
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38

ITEM 4.	CONTROLS AND PROCEDURES	39


PART II.	OTHER INFORMATION	40
ITEM 1.	LEGAL PROCEDINGS	40
ITEM 1A.	RISK FACTORS	41
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	42
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	42
ITEM 4.	MINE SAFETY DISCLOSURES	42
ITEM 6.	EXHIBITS	43

SIGNATURES		44



(In thousands, except per share amounts)	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Revenues:
Net video gaming	$	—		$	100,994	$	101,575		$	195,169
Amusement	260			1,348		1,952			2,786
ATM fees and other revenue	119			1,925		2,080			3,737
Total net revenues	379			104,267		105,607			201,692
Operating expenses:
Video gaming expenses	—			66,082		67,980			127,703
General and administrative	10,451			17,476		33,919			33,600
Depreciation and amortization of property and equipment	5,071			6,100		9,938			12,141
Amortization of route and customer acquisition costs and location contracts acquired	5,565			4,624		11,130			8,927
Other expenses, net	3,132			730		4,336			1,346
Total operating expenses	24,219			95,012		127,303			183,717
Operating (loss) income	(23,840		)	9,255		(21,696		)	17,975
Interest expense, net	2,489			3,156		6,738			6,203
(Loss) income before income tax (benefit) expense	(26,329		)	6,099		(28,434		)	11,772
Income tax (benefit) expense	(5,055		)	1,771		(5,194		)	3,449
Net (loss) income	$	(21,274	)	$	4,328	$	(23,240	)	$	8,323
Net (loss) income per common share:
Basic ⁽¹⁾	$	(0.27	)	$	0.07	$	(0.30	)	$	0.14
Diluted ⁽¹⁾	(0.27		)	0.07		(0.30		)	0.13
Weighted average number of shares outstanding:
Basic ⁽¹⁾	78,317			58,605		78,161			57,896
Diluted ⁽¹⁾	78,317			61,904		78,161			61,742



(In thousands, except par value and share amounts)	June 30,			December 31,
	2020			2019
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	148,834		$	125,403
Prepaid expenses	3,443			4,151
Income taxes receivable	3,907			3,907
Investment in convertible notes (current)	17,000			11,000
Other current assets	6,637			7,034
Total current assets	179,821			151,495
Property and equipment, net	123,759			119,201
Other assets:
Route and customer acquisition costs, net	16,460			17,399
Location contracts acquired, net	156,624			166,783
Goodwill	34,511			34,511
Investment in convertible notes, less current portion	13,000			19,000
Other assets	1,101			928
	221,696			238,621
Total assets	$	525,276		$	509,317
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of debt	$	18,250		$	15,000
Current portion of route and customer acquisition costs payable	1,675			1,700
Accrued location gaming expense	—			1,323
Accrued state gaming expense	—			7,119
Accounts payable and other accrued expenses	27,278			19,511
Current portion of consideration payable	3,272			10,293
Total current liabilities	50,475			54,946
Long-term liabilities:
Debt, net of current maturities	380,740			334,692
Route and customer acquisition costs payable, less current portion	4,708			4,752
Consideration payable, less current portion	16,541			16,426
Deferred income tax liability	7,781			12,976
Total long-term liabilities	409,770			368,846
Stockholders’ equity :
Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2020 and December 31, 2019	—			—
Class A-1 Common Stock, par value $0.0001; 250,000,000 shares authorized; 78,382,405 shares issued and outstanding at June 30, 2020; 76,637,470 shares issued and outstanding at December 31, 2019	8			8
Class A-2 Common Stock, par value $0.0001; 10,000,000 shares authorized; 3,403,363 shares issued and outstanding at June 30, 2020; 4,999,999 shares issued and outstanding at December 31, 2019	1			1
Additional paid-in capital	108,732			105,986
Accumulated deficit	(43,710		)	(20,470		)
Total stockholders' equity	65,031			85,525
Total liabilities and equity	$	525,276		$	509,317



(In thousands, except shares)	Class A-1			Class A-2				Additional					Total
	Common Stock			Common Stock				Paid-In		Accumulated			Stockholders’
	Shares	Amount		Shares		Amount		Capital		Deficit			Equity
Balance, January 1, 2020	76,637,470	$	8	4,999,999		$	1	$	105,986	$	(20,470	)	$	85,525
Conversion of Class A-2 Common Stock to Class A-1 Common Stock	1,596,636	—		(1,596,636	)	—		—		—			—
Stock-based compensation	—	—		—		—		1,060		—			1,060
Net loss	—	—		—		—		—		(1,966		)	(1,966		)
Balance, March 31, 2020	78,234,106	8		3,403,363		1		107,046		(22,436		)	84,619
Exercise of common stock options	148,299	—		—		—		359		—			359
Stock-based compensation	—	—		—		—		1,327		—			1,327
Net loss	—	—		—		—		—		(21,274		)	(21,274		)
Balance, June 30, 2020	78,382,405	$	8	3,403,363		$	1	$	108,732	$	(43,710	)	$	65,031



ACCEL ENTERTAINMENT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net (loss) income	$	(23,240	)	$	8,323
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization of property and equipment	9,938			12,141
Amortization of route and customer acquisition costs and location contracts acquired	11,130			8,927
Amortization of debt issuance costs	936			333
Stock-based compensation	2,387			256
Loss (gain) on disposal of property and equipment	93			(47		)
Net loss on write-off of route and customer acquisition costs and route and customer acquisition costs payable	611			171
Remeasurement of contingent consideration	(2,432		)	227
Payments on consideration payable	(1,548		)	—
Accretion of interest on route and customer acquisition costs payable, contingent consideration, and contingent stock consideration	1,078			255
Deferred income taxes	(5,195		)	—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	1,105			(3,360		)
Income taxes receivable	—			(1,050		)
Route and customer acquisition costs	(585		)	(1,271		)
Route and customer acquisition costs payable	(69		)	(714		)
Accounts payable and accrued expenses	(11,319		)	1,973
Other assets	(174		)	(81		)
Net cash (used in) provided by operating activities	(17,284		)	26,083
Cash flows from investing activities:
Purchases of property and equipment	(4,123		)	(10,600		)
Proceeds from the sale of property and equipment	121			52
Net cash used in investing activities	(4,002		)	(10,548		)
Cash flows from financing activities:
Payments on term loan	(6,000		)	(3,125		)
Proceeds from delayed draw term loans	65,000			10,750
Payments on delayed draw term loans	(2,313		)	(4,750		)
Net payments on line of credit	(8,000		)	(12,000		)
Payments for debt issuance costs	(325		)	—
Proceeds from exercise of stock options and warrants	359			1,851
Payments on consideration payable	(4,004		)	(452		)
Payments on capital lease obligation	—			(531		)
Net cash provided by (used in) financing activities	44,717			(8,257		)
Net increase in cash and cash equivalents	23,431			7,278
Cash and cash equivalents:
Beginning of period	125,403			92,229
End of period	$	148,834		$	99,507
Supplemental disclosures of cash flow information:
Cash payments for:
Interest, net of amount of capitalized	$	6,678		$	5,263
Income taxes	$	—		$	1,759
Supplemental schedules of noncash investing and financing activities:
Purchases of property and equipment in accounts payable and accrued liabilities	$	10,586		$	2,186



	Three months ended		Six months ended
	June 30, 2020		June 30, 2020
Decrease to depreciation expense	$	1,898	$	4,511
Decrease to net loss	$	1,533	$	3,687
Decrease to loss per share	$	0.02	$	0.05



	Years
Video gaming terminals and equipment	10
Amusement and other equipment	7
Office equipment and furniture	7
Computer equipment and software	3-5
Leasehold improvements	5
Vehicles	5
Buildings and improvements	15-29



	June 30, 2020			December 31, 2019
Video game terminals and equipment	$	176,453		$	166,850
Amusement and other equipment	19,115			16,417
Office equipment and furniture	1,590			1,540
Computer equipment and software	9,405			8,715
Leasehold improvements	1,507			44
Vehicles	10,254			9,304
Buildings and improvements	10,757			12,075
Land	911			911
Construction in progress	1,025			768
Total property and equipment	231,017			216,624
Less accumulated depreciation and amortization	(107,258		)	(97,423		)
Property and equipment, net	$	123,759		$	119,201



	June 30, 2020			December 31, 2019
Cost	$	28,167		$	28,501
Accumulated amortization	(11,707		)	(11,102		)
Route and customer acquisition costs, net	$	16,460		$	17,399



	June 30, 2020			December 31, 2019
2019 Senior Secured Credit Facility:
Revolving credit facility	$	50,500		$	58,500
Term Loan	234,000			240,000
Delayed Draw Term Loan (DDTL)	122,688			60,000
Total debt	407,188			358,500
Less: Debt issuance costs	(8,198		)	(8,808		)
Total debt, net of debt issuance costs	398,990			349,692
Less: Current maturities	(18,250		)	(15,000		)
Total debt, net of current maturities	$	380,740		$	334,692


•	$100.0 million revolving credit facility, including a letter of credit facility with a $10.0 million sublimit and a swing line facility with a $10.0 million sublimit,



	Three months ended		Six months ended
	June 30, 2019		June 30, 2019
Revenues	$	119,427	$	231,902
Net income	5,542		10,711



	June 30, 2020				December 31, 2019
	Current		Long-Term		Current		Long-Term
TAV	$	494	$	3,546	$	490	$	3,497
Abraham	26		—		55		—
Fair Share Gaming	1,221		474		1,057		899
Family Amusement	395		2,787		293		2,815
Skyhigh	762		4,212		763		3,948
G3	294		99		2,952		154
Grand River	—		5,423		2,304		5,113
IGS	80		—		2,379		—
Total	$	3,272	$	16,541	$	10,293	$	16,426



			Fair Value Measurement at Reporting Date Using
	June 30, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Contingent consideration	$	12,591	$	—	$	—	$	12,591



			Fair Value Measurement at Reporting Date Using
	December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Contingent consideration	$	17,327	$	—	$	—	$	17,327



Redemption Date	Fair Market Value of Class A-1 shares
(period to expiration of the New Accel Warrants)		$10	$11	$12	$13	$14	$15	$16	$17	$18
57 months		0.257	0.277	0.294	0.310	0.324	0.337	0.348	0.358	0.365
54 months		0.252	0.272	0.291	0.307	0.322	0.335	0.347	0.357	0.365
51 months		0.246	0.268	0.287	0.304	0.320	0.333	0.346	0.357	0.365
48 months		0.241	0.263	0.283	0.301	0.317	0.332	0.344	0.356	0.365
45 months		0.235	0.258	0.279	0.298	0.315	0.330	0.343	0.356	0.365
42 months		0.228	0.252	0.274	0.294	0.312	0.328	0.342	0.355	0.364
39 months		0.221	0.246	0.269	0.290	0.309	0.325	0.340	0.354	0.364
36 months		0.213	0.239	0.263	0.285	0.305	0.323	0.339	0.353	0.364
33 months		0.205	0.232	0.257	0.280	0.301	0.320	0.337	0.352	0.364
30 months		0.196	0.224	0.250	0.274	0.297	0.316	0.335	0.351	0.364
27 months		0.185	0.214	0.242	0.268	0.291	0.313	0.332	0.350	0.364
24 months		0.173	0.204	0.233	0.260	0.285	0.308	0.329	0.348	0.364
21 months		0.161	0.193	0.223	0.252	0.279	0.304	0.326	0.347	0.364
18 months		0.146	0.179	0.211	0.242	0.271	0.298	0.322	0.345	0.363
15 months		0.130	0.164	0.197	0.230	0.262	0.291	0.317	0.342	0.363
12 months		0.111	0.146	0.181	0.216	0.250	0.282	0.312	0.339	0.363
9 months		0.090	0.125	0.162	0.199	0.237	0.272	0.305	0.336	0.362
6 months		0.065	0.099	0.137	0.178	0.219	0.259	0.296	0.331	0.362
3 months		0.034	0.065	0.104	0.150	0.197	0.243	0.286	0.326	0.361
0 months		—	—	0.042	0.115	0.179	0.233	0.281	0.323	0.361



	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Net (loss) income	$	(21,274	)	$	4,328	$	(23,240	)	$	8,323

Basic weighted average outstanding shares of common stock	78,317			58,605		78,161			57,896
Dilutive effect of stock-based awards for common stock	—			1,120		—			1,117
Dilutive effect of stockholder notes receivable for common stock	—			917		—			948
Dilutive effect of warrants for common stock	—			1,263		—			1,781
Diluted weighted average outstanding shares of common stock	78,317			61,904		78,161			61,742

Earnings (loss) per share:
Basic	$	(0.27	)	$	0.07	$	(0.30	)	$	0.14
Diluted	$	(0.27	)	$	0.07	$	(0.30	)	$	0.13



(in thousands, except %'s)	Three Months Ended June 30,					Increase / (Decrease)
	2020			2019		Change ($)			Change (%)
Revenues:
Net video gaming	$	—		$	100,994	$	(100,994	)	(100.0	)%
Amusement	260			1,348		(1,088		)	(80.7	)%
ATM fees and other revenue	119			1,925		(1,806		)	(93.8	)%
Total revenues	379			104,267		(103,888		)	(99.6	)%
Operating expenses:
Video gaming expenses	—			66,082		(66,082		)	(100.0	)%
General and administrative	10,451			17,476		(7,025		)	(40.2	)%
Depreciation and amortization of property and equipment	5,071			6,100		(1,029		)	(16.9	)%
Amortization of route and customer acquisition costs and location contracts acquired	5,565			4,624		941			20.4	%
Other expenses, net	3,132			730		2,402			329.0	%
Total operating expenses	24,219			95,012		(70,793		)	(74.5	)%
Operating (loss) income	(23,840		)	9,255		(33,095		)	(357.6	)%
Interest expense, net	2,489			3,156		(667		)	(21.1	)%
(Loss) income before income tax (benefit) expense	(26,329		)	6,099		(32,428		)	(531.7	)%
Income tax (benefit) expense	(5,055		)	1,771		(6,826		)	(385.4	)%
Net (loss) income	$	(21,274	)	$	4,328	$	(25,602	)	(591.5	)%



	As of June 30,		Increase / (Decrease)
	2020	2019	Change $		Change %
Licensed establishments	2,335	1,762	573		32.5	%
Video gaming terminals	11,108	8,082	3,026		37.4	%
Average remaining contract term (years) ⁽¹⁾	6.8	7.4	(0.6	)	(8.1	)%



	June 30				Increase / (Decrease)
	2020		2019		Change $			Change %
Hold-per-day - for the three months ended⁽¹⁾	$	—	$	139	$	(139	)	(100.0	)%
Hold-per-day - for the six months ended ⁽²⁾	$	124	$	137	$	(13	)	(9.5	)%


(2)	Stock-based compensation consists of options, restricted stock units and warrants.


(3)	Other expenses, net consists of (i) non-cash expenses including the remeasurement of contingent consideration liabilities, (ii) non-recurring expenses including expenses relating to lobbying efforts and legal expenses in Pennsylvania and lobbying efforts in Missouri, (iii) non-recurring expenses and (iv) non-recurring costs associated with COVID-19.


(4)	Calculated by excluding the impact of the non-GAAP adjustments from the current period tax provision calculations.



	Less than 1 Year		Due in 1 to 3 years		Due in 3 to 5 years		Due in over 5 years		Total
Credit facility principal payments⁽¹⁾	$	18,250	$	36,500	$	352,438	$	—	$	407,188
Interest payments on credit facility⁽²⁾	10,110		18,873		11,612		—		40,595
Operating lease obligations⁽³⁾	273		246		65		—		584
Total contractual obligations	$	28,633	$	55,619	$	364,115	$	—	$	448,367



Exhibit No.		Exhibit

3.3		Bylaws Amendment (Incorporated by reference to Exhibit 3.3 to the Company's Current Report on Form 8-K dated May 6, 2020

10.19 *		Tender and Exchange Agreement dated June 18, 2020

31.1		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)

31.2		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)

32.1		Section 1350 Certification of Principal Executive Officer

32.2		Section 1350 Certification of Principal Financial Officer

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Inline XBRL File (included in Exhibit 101)


**	Indicates management contract or compensation plan or agreement.



	ACCEL ENTERTAINMENT, INC.

Date: August 5, 2020	By:	/s/ Brian Carroll
		Brian Carroll Chief Financial Officer



Date: August 5, 2020		/s/ Andrew Rubenstein
		Andrew Rubenstein
		Chief Executive Officer (Principal Executive Officer)



Date: August 5, 2020		/s/ Brian Carroll
		Brian Carroll
		Chief Financial Officer (Principal Financial Officer)


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.