ACEL 8-K
Accel Entertainment, Inc. (ACEL)
8-K
2022-11-08
For: 2022-11-08
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April 08, 2026
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): November 8, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||||||||
| , | |||||||||||||||||
| (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:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
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 November 8, 2022, the Company issued a press release announcing its financial and operating results for the third quarter ended September 30, 2022. 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 Number | Description | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
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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: November 8, 2022 | By: | /s/ Mathew Ellis | |||||||||
| Mathew Ellis | |||||||||||
| Chief Financial Officer | |||||||||||
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Accel Entertainment Announces Q3 2022 Operating Results
Chicago, IL – November 8, 2022 – Accel Entertainment, Inc. (NYSE: ACEL) today announced certain financial and operating results for the third quarter ended September 30, 2022.
Highlights:
•Revenue of $267.0 million for Q3 2022, an increase of 38% compared to Q3 2021
•Q3 2022 Illinois revenue per location per day increased 3% when compared to Q3 2021
•Net income of $22.4 million for Q3 2022; an increase of 108% compared to Q3 2021
•Adjusted EBITDA of $41.1 million for Q3 2022, an increase of 9% when compared to Q3 2021
•Q3 2022 ended with 3,517 locations; an increase of 38% compared to Q3 2021 due primarily to the acquisition of Century Gaming, Inc. ("Century")
•Q3 2022 ended with 22,429 gaming terminals; an increase of 68% compared to Q3 2021 due primarily to the acquisition of Century
•Q3 2022 ended with $309 million of net debt; an increase of 109% compared to Q3 2021 due primarily to borrowings of $160 million on our credit facility in Q2 2022 to finance the Century acquisition
•Repurchased $22.5 million of Accel Class A-1 common stock in Q3 2022
•On August 1, 2022, Accel acquired the amusement assets of VVS, Inc., an operator in Nebraska, for $9.5 million
•On September 9, 2022, Accel acquired River City Amusement Company, an amusement operator in Nebraska and Iowa, for $2.8 million
Guidance:
Accel is reaffirming 2022 location, gaming terminals, revenue, and Adjusted EBITDA guidance. Capital expenditures guidance increased due to Accel's investment in the Nebraska market and the acceleration of planned 2023 capital expenditures to 2022.
2022 guidance [1]:
•End 2022 with an estimated 3,550 - 3,600 locations
•End 2022 with an estimated 22,700 - 23,200 gaming terminals
•2022 Revenue estimated to be $960 - $990 million
•2022 Adjusted EBITDA[*] estimated to be $160 - $165 million
•2022 capital expenditures estimated to be $38 - $43 million of cash
Accel CEO Andy Rubenstein commented, “We're pleased with another strong quarter and remain focused on executing our growth strategy. Our solid performance despite the current inflationary pressures further demonstrates the strength and resilience of our locally-focused business model. We expanded our footprint in Nebraska and continue to evaluate multiple opportunities across the country while returning capital to our shareholders."
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| Condensed Consolidated Statements of Operations and Other Data | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Total revenues | $ | 266,967 | $ | 193,351 | $ | 691,727 | $ | 542,394 | |||||||||||||||
| Operating income | 23,239 | 18,647 | 71,761 | 53,129 | |||||||||||||||||||
| Income before income tax expense | 27,358 | 14,743 | 77,227 | 36,526 | |||||||||||||||||||
| Net income | 22,444 | 10,807 | 60,696 | 24,753 | |||||||||||||||||||
| Other Financial Data: | |||||||||||||||||||||||
Adjusted EBITDA(1) | 41,125 | 37,631 | 119,083 | 106,427 | |||||||||||||||||||
Adjusted net income (2) | 18,932 | 17,317 | 59,053 | 54,106 | |||||||||||||||||||
| (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 net income and Adjusted EBITDA.” | ||||
| (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 September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net revenues by state: | |||||||||||||||||||||||
| Illinois | $ | 200,914 | $ | 192,205 | $ | 601,735 | $ | 539,211 | |||||||||||||||
| Nevada | 28,439 | — | 37,359 | — | |||||||||||||||||||
| Montana | 33,456 | — | 44,282 | — | |||||||||||||||||||
| Other | 4,158 | 1,146 | 8,351 | 3,183 | |||||||||||||||||||
| Total net revenues | $ | 266,967 | $ | 193,351 | $ | 691,727 | $ | 542,394 | |||||||||||||||
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Key Business Metrics
Locations (1) | As of September 30, | ||||||||||
| 2022 | 2021 | ||||||||||
| Illinois | 2,596 | 2,549 | |||||||||
| Montana | 586 | — | |||||||||
| Nevada | 335 | — | |||||||||
| Total locations | 3,517 | 2,549 | |||||||||
Terminals (1) | As of September 30, | ||||||||||
| 2022 | 2021 | ||||||||||
| Illinois | 14,033 | 13,384 | |||||||||
| Montana | 5,782 | — | |||||||||
| Nevada | 2,614 | — | |||||||||
| Total terminals | 22,429 | 13,384 | |||||||||
| (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 | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| Net cash provided by operating activities | $ | 78,250 | $ | 80,262 | |||||||
| Net cash used in investing activities | (168,871) | (21,220) | |||||||||
| Net cash provided by (used in) financing activities | 103,898 | (13,610) | |||||||||
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Non-GAAP Financial Measures | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Net income | $ | 22,444 | $ | 10,807 | $ | 60,696 | $ | 24,753 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
Amortization of intangible assets and route and customer acquisition costs (1) | 5,156 | 6,221 | 12,278 | 18,489 | |||||||||||||||||||
Stock-based compensation (2) | 1,070 | 966 | 4,956 | 4,707 | |||||||||||||||||||
(Gain) loss on change in fair value of contingent earnout shares (3) | (10,358) | 888 | (19,497) | 6,867 | |||||||||||||||||||
Other expenses, net (4) | 3,106 | 4,173 | 7,894 | 8,913 | |||||||||||||||||||
Tax effect of adjustments (5) | (2,486) | (5,738) | (7,274) | (9,623) | |||||||||||||||||||
| Adjusted net income | $ | 18,932 | $ | 17,317 | $ | 59,053 | $ | 54,106 | |||||||||||||||
| Depreciation and amortization of property and equipment | 8,136 | 6,518 | 20,575 | 18,820 | |||||||||||||||||||
| Interest expense, net | 6,239 | 3,016 | 14,031 | 9,736 | |||||||||||||||||||
Emerging markets (6) | 418 | 1,106 | 1,619 | 2,369 | |||||||||||||||||||
| Income tax expense | 7,400 | 9,674 | 23,805 | 21,396 | |||||||||||||||||||
| Adjusted EBITDA | $ | 41,125 | $ | 37,631 | $ | 119,083 | $ | 106,427 | |||||||||||||||
(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 combination, 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 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.
(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.
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Reconciliation of Debt to Net Debt | |||||||||||
As of September 30, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| Debt, net of current maturities | $ | 497,976 | $ | 309,717 | |||||||
| Plus: Current maturities of debt | 23,463 | 18,250 | |||||||||
| Less: Cash and cash equivalents | (212,063) | (179,883) | |||||||||
| Net debt | $ | 309,376 | $ | 148,084 | |||||||
Conference Call
Accel will host an investor conference call on November 8, 2022 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=64a275d4&confId=43706. 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, 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 2022 guidance, potential acquisitions or strategic alliances, and 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: 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; Accel's ability to successfully integrate its business with the business of Century and realize the full benefits of the Century acquisition; Accel’s
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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 economic 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 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, 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
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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.
[1] 2022 guidance includes Century’s results as of the acquisition date and assumes the results from Georgia will not be added back to our Adjusted EBITDA during the second half of 2022 because Georgia has operated for more than 24 months and would no longer be an "Emerging Market.”
[*] 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
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ACCEL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
| (In thousands, except per share amounts) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Net gaming | $ | 255,606 | $ | 186,017 | $ | 662,491 | $ | 520,915 | |||||||||||||||
| Amusement | 4,860 | 4,010 | 14,543 | 12,338 | |||||||||||||||||||
| Manufacturing | 2,489 | — | 3,408 | — | |||||||||||||||||||
| ATM fees and other revenue | 4,012 | 3,324 | 11,285 | 9,141 | |||||||||||||||||||
| Total net revenues | 266,967 | 193,351 | 691,727 | 542,394 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization expense shown below) | 185,878 | 129,739 | 473,164 | 364,402 | |||||||||||||||||||
| Cost of manufacturing good sold (exclusive of depreciation and amortization expense shown below) | 1,656 | — | 2,421 | — | |||||||||||||||||||
| General and administrative | 39,796 | 28,053 | 103,634 | 78,641 | |||||||||||||||||||
| Depreciation and amortization of property and equipment | 8,136 | 6,518 | 20,575 | 18,820 | |||||||||||||||||||
| Amortization of intangible assets and route and customer acquisition costs | 5,156 | 6,221 | 12,278 | 18,489 | |||||||||||||||||||
| Other expenses, net | 3,106 | 4,173 | 7,894 | 8,913 | |||||||||||||||||||
| Total operating expenses | 243,728 | 174,704 | 619,966 | 489,265 | |||||||||||||||||||
| Operating income | 23,239 | 18,647 | 71,761 | 53,129 | |||||||||||||||||||
| Interest expense, net | 6,239 | 3,016 | 14,031 | 9,736 | |||||||||||||||||||
| (Gain) loss on change in fair value of contingent earnout shares | (10,358) | 888 | (19,497) | 6,867 | |||||||||||||||||||
| Income before income tax expense | 27,358 | 14,743 | 77,227 | 36,526 | |||||||||||||||||||
| Income tax expense | 4,914 | 3,936 | 16,531 | 11,773 | |||||||||||||||||||
| Net income | $ | 22,444 | $ | 10,807 | $ | 60,696 | $ | 24,753 | |||||||||||||||
| Net income per common share: | |||||||||||||||||||||||
| Basic | $ | 0.25 | $ | 0.11 | $ | 0.66 | $ | 0.26 | |||||||||||||||
| Diluted | 0.25 | 0.11 | 0.66 | 0.26 | |||||||||||||||||||
| Weighted average number of shares outstanding: | |||||||||||||||||||||||
| Basic | 89,992 | 94,004 | 91,299 | 93,607 | |||||||||||||||||||
| Diluted | 90,528 | 94,728 | 91,945 | 94,469 | |||||||||||||||||||
| Comprehensive income | |||||||||||||||||||||||
| Net income | $ | 22,444 | $ | 10,807 | $ | 60,696 | $ | 24,753 | |||||||||||||||
| Unrealized (loss) gain on investment in convertible notes (net of income taxes of $(126) and $2,135, respectively) | — | (315) | — | 5,358 | |||||||||||||||||||
| Unrealized gain on interest rate caplets (net of income taxes of $2,317 and $5,011, respectively) | 5,925 | — | 12,696 | — | |||||||||||||||||||
| Comprehensive income | $ | 28,369 | $ | 10,492 | $ | 73,392 | $ | 30,111 | |||||||||||||||
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ACCEL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share amounts) | September 30, | December 31 | |||||||||
| 2022 | 2021 | ||||||||||
| Assets | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 212,063 | $ | 198,786 | |||||||
| Accounts receivable, net | 8,854 | 5,121 | |||||||||
| Income taxes receivable | 1,502 | — | |||||||||
| Inventories | 6,873 | — | |||||||||
| Prepaid expenses | 7,827 | 6,998 | |||||||||
| Interest rate caplets | 6,893 | — | |||||||||
| Investment in convertible notes | 32,065 | 32,065 | |||||||||
| Other current assets | 7,630 | 5,025 | |||||||||
| Total current assets | 283,707 | 247,995 | |||||||||
| Property and equipment, net | 206,767 | 152,251 | |||||||||
| Other noncurrent assets: | |||||||||||
| Route and customer acquisition costs, net | 17,769 | 15,913 | |||||||||
| Location contracts acquired, net | 189,382 | 150,672 | |||||||||
| Goodwill | 99,490 | 46,199 | |||||||||
| Other intangible assets | 23,588 | — | |||||||||
| Interest rate caplets, net of current | 14,048 | — | |||||||||
| Other assets | 3,598 | 3,043 | |||||||||
| Total other noncurrent assets | 347,875 | 215,827 | |||||||||
| Total assets | $ | 838,349 | $ | 616,073 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Current maturities of debt | $ | 23,463 | $ | 17,500 | |||||||
| Current portion of route and customer acquisition costs payable | 3,040 | 2,079 | |||||||||
| Accrued location gaming expense | 5,763 | 3,969 | |||||||||
| Accrued state gaming expense | 15,736 | 11,441 | |||||||||
| Accounts payable and other accrued expenses | 21,596 | 14,616 | |||||||||
| Accrued compensation and related expenses | 10,228 | 8,886 | |||||||||
| Current portion of consideration payable | 12,854 | 13,344 | |||||||||
| Total current liabilities | 92,680 | 71,835 | |||||||||
| Long-term liabilities: | |||||||||||
| Debt, net of current maturities | 497,976 | 324,022 | |||||||||
| Route and customer acquisition costs payable, less current portion | 4,285 | 3,953 | |||||||||
| Consideration payable, less current portion | 4,377 | 12,706 | |||||||||
| Contingent earnout share liability | 23,334 | 42,831 | |||||||||
| Warrant and other long-term liabilities | 17 | 17 | |||||||||
| Deferred income tax liability | 34,798 | 2,248 | |||||||||
| Total long-term liabilities | 564,787 | 385,777 | |||||||||
| Stockholders’ equity : | |||||||||||
Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2022 and December 31, 2021 | — | — | |||||||||
Class A-1 Common Stock, par value $0.0001; 250,000,000 shares authorized; 94,434,865 shares issued and 88,569,672 shares outstanding at September 30, 2022; 94,111,868 shares issued and 93,410,563 shares outstanding at December 31, 2021 | 9 | 9 | |||||||||
| Treasury stock, at cost | (64,612) | (8,983) | |||||||||
| Additional paid-in capital | 192,314 | 187,656 | |||||||||
| Accumulated other comprehensive income | 12,696 | — | |||||||||
| Accumulated earnings (deficit) | 40,475 | (20,221) | |||||||||
| Total stockholders' equity | 180,882 | 158,461 | |||||||||
| Total liabilities and stockholders' equity | $ | 838,349 | $ | 616,073 | |||||||
9
Third Quarter 2022 Earnings Presentation November 2022
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, any statements regarding our 2022 guidance and 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; 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; 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, 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 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 or other presentations or future quarterly reports, 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” 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 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, Adjusted net income, and Net Debt. 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. 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. 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 were 217 gaming days. For the year ended December 31, 2021, there were approximately 347 gaming days. 2. Voluntary contract renewal rate for the 3 years ending December 31, 2021 excluding Century. 3. Calculated as of September 30, 2022. 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 September 30, 2022, Accel owned and operated 22,429 terminals across 3,517 locations in Illinois, Montana, and Nevada Average Daily Net Video Gaming Revenue(1) ($ in thousands) Up to 8-year agreements 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 $309mm of Net Debt(3) Gaming legislation provides significant embedded opportunity for additional growth $353 $458 $658 $882 $1,125 $1,383 $2,030 $2,427 2015 2016 2017 2018 2019 2020 2021 2022 YTD
Recent Highlights • Illinois Q3 2022 same store sales grew 3% compared to Q3 2021 • Expanded Nebraska footprint with two acquisitions of amusement operators: − On August 1, Accel paid $9.5 million to purchase the amusement assets of VVS, Inc. − On September 9, Accel paid $2.8 million to purchase River City Amusement Company • Repurchased $22.5 million of Accel A-1 Common Stock in Q3 2022 4
$26 $43 $38 $33$35 $43 $41 Q1 Q2 Q3 Q4 2021 2022 $147 $202 $193 $192$197 $228 $267 Q1 Q2 Q3 Q4 2021 2022 Accel Quarterly KPIs 1. Adjusted EBITDA is a non-GAAP financial measure that may not be comparable to other similarly titled measures of other companies. Accel does not consider this non-GAAP measure in isolation or as an alternative to similar financial measures determined in accordance with GAAP. For more information with respect to these Non-GAAP financial measures, see page 2 “Use of Non-GAAP Financial Measures,” and for a reconciliation of each of these measures to their most directly comparable GAAP measure, see page 10 "Non-GAAP to GAAP Reconciliation.” Locations (#) Terminals (#) Revenue ($mm) Adjusted EBITDA(1) ($mm) Open Jan 19 - Mar 31 Open Jan 19 - Mar 31 5 2,470 2,527 2,549 2,584 2,565 2,572 2,596 585 586 332 335 3,489 3,517 Q1 Q2 Q3 Q4 2021 IL 2022 IL 2022 MT 2022 NV 12,720 13,177 13,384 13,639 13,663 13,801 14,033 5,742 5,782 2,585 2,614 22,128 22,429 Q1 Q2 Q3 Q4 2021 IL 2022 IL 2022 MT 2022 NV
2022 Results 6 1. 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.” 2. Presented as cash spend. 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.” Note: Numbers may not total due to rounding. Variances may not recalculate due to rounding. $ in millions Q3 2021 Q3 2022 % Change YTD 2021 YTD 2022 % Change Locations 2,549 3,517 38% 2,549 3,517 38% Terminals 13,384 22,429 68% 13,384 22,429 68% Revenue $193 $267 38% $542 $692 28% Adj EBITDA(1) $38 $41 9% $106 $119 12% CapEx(2) $8 $20 152% $19 $33 76% Net Debt(3) $148 $309 109% $148 $309 109%
Reaffirm Guidance 7 1. 2022 guidance includes Century’s results as of the acquisition date and assumes the results from Georgia will not be added back to our Adjusted EBITDA during the second half of 2022 because Georgia has operated for more than 24 months and would no longer be an "Emerging Market.” 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,” 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. 3. Presented as cash spend. $ in millions 2022 Guidance(1) Locations 3,550 – 3,600 Terminals 22,700 – 23,200 Revenue $960 – $990 Adj EBITDA(2) $160 – $165 CapEx(3) $38 – $43
Historical Financial Summary 8 $ in millions 1. Cost of Revenue and Cost of Manufacturing Goods Sold consists of (i) taxes on net video gaming revenue that is payable to the local jurisdiction, (ii) licenses, permits and other fees required for the operation of gaming terminals and other equipment, (iii) location revenue share, which is governed by local governing bodies and location contracts, (iv) ATM and amusement commissions payable to locations, (v) ATM and amusement fees, and (vi) costs associated with the sale of gaming terminals. 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. Q3 YTD YoY YoY 2018 2019 2020 2021 2021 2022 Growth 2021 2022 Growth No. of Locations 1,686 2,312 2,435 2,584 2,549 3,517 38% 2,549 3,517 38% No. of Terminals 7,649 10,499 12,247 13,639 13,384 22,429 68% 13,384 22,429 68% Net Gaming Revenue 322 411 301 706 186 256 37% 521 662 27% Other Revenue 13 18 16 29 7 11 55% 21 29 36% Gross Revenues 335 429 316 735 193 267 38% 542 692 28% % YoY Growth 35% 28% (26%) 132% 38% 28% Less: Cost of Revenue (exclusive of amortization and depreciation expense shown below) (1) (217) (282) (211) (494) (130) (188) 45% (364) (476) 31% Gross Profit 118 147 105 241 64 79 25% 178 216 21% % Margin 35% 34% 33% 33% 33% 30% 33% 31% Less: G&A Expenses (54) (69) (77) (111) (28) (40) 42% (79) (104) 32% EBITDA 63 77 28 130 36 40 11% 99 113 13% Adjusted EBITDA (2) 64 80 34 140 38 41 9% 106 119 12% % Margin 19% 19% 11% 19% 19% 15% 20% 17% % YoY Growth 36% 25% (57%) 312% 9% 12% Less: D&A of Property & Equipment (21) (26) (21) (25) (7) (8) (19) (21) Less: Amortization of intangible assets and route and customer acquisition costs (15) (18) (23) (22) (6) (5) (18) (12) EBIT 28 33 (16) 83 23 26 62 80 Less: Other Expenses, net (3) (20) (9) (13) (4) (3) (9) (8) Less: Interest Expense, net (10) (13) (14) (13) (3) (6) (10) (14) Less: Income tax benefit (expense) (4) (5) 17 (15) (4) (5) (12) (17) Less: Gain (loss) on change in fair value of contingent earnout shares (3) -- (10) 8 (10) (1) 10 (7) 19 Less: Gain (loss) on change in fair value of warrants (4) -- (21) 13 -- -- -- -- -- Less: Loss on debt extinguishment -- (1) -- (1) -- -- -- -- Reported Net Income (Loss) 11 (37) (0) 32 11 22 25 61 Adjusted Net Income 23 23 6 71 17 19 54 59 Twelve Months Ended Three Months Ended Nine Months Ended December 31, September 30, September 30,
Accel Balance Sheet 9 Note: Numbers may not total due to rounding. $ in millions December 31, 2021 September 30, 2022 Assets Current Assets: Cash and cash equivalents $199 $212 Other current assets $49 $72 Total current assets $248 $284 Property and equipment, net $152 $207 Route and customer acquisition costs, net $16 $18 Location contracts acquired, net $151 $189 Goodwill $46 $99 Other assets $3 $41 Total assets $616 $838 Liabilities and Stockholders' Equity Current liab ilities: Short term debt and current maturities $18 $23 Accrued state and location gaming expense $15 $21 Other current liabilities $39 $48 Total current liabilities $72 $93 Long-term liab ilities: Long-term debt $324 $498 Contingent earnout share liability $43 $23 Other liabilities $19 $43 Total liabilities $458 $657 Total stockholders' equity $158 $181 Total liabilities and stockholders' equity $616 $838
Non-GAAP to GAAP Reconciliation 10 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 combination, 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 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. 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. $ in millions 2018 2019 2020 2021 2021 2022 2021 2022 Reported Net Income (Loss) 11 (37) (0) 32 11 22 25 61 (+) Amortization of intangible assets and route and customer acquisition costs (1) 15 18 23 22 6 5 18 12 (+) Stock Based Comp(2) 0 2 6 6 1 1 5 5 (+) (Gain) loss on change in fair value of contingent earnout shares (3) – 10 (8) 10 1 (10) 7 (19) (+) (Gain) loss on change in fair value of w arrants – 21 (13) – – – – – (+) Other Expenses, net(4) 3 20 9 13 4 3 9 8 (+) Tax effect of adjustments(5) (6) (11) (10) (11) (6) (2) (10) (7) Adjusted Net Income 23 23 6 71 17 19 54 59 (+) D&A of Property & Equipment 21 26 21 25 7 8 19 21 (+) Interest Expense, net 10 13 14 13 3 6 10 14 (+) Emerging Markets(6) – – 1 3 1 0 2 2 (+) Income Tax (Benefit) Expense 10 17 (7) 26 10 7 21 24 (+) Loss on debt extinguishment – 1 – 1 – – – – Adjusted EBITDA 64 80 34 140 38 41 106 119 Twelve Months Ended Three Months Ended Nine Months Ended December 31, September 30, September 30, March 31, June 30, Sep. 30, Dec. 31, March 31, June 30, September 30, 2021 2021 2021 2021 2022 2022 2022 Reported Net Income 2 12 11 7 16 22 22 (+) Amortization of intangible assets and route and customer acquisition costs (1) 6 6 6 4 4 4 5 (+) Stock Based Comp (2) 2 2 1 2 2 2 1 (+) (Gain) loss on change in fair value of contingent earnout shares (3) 3 3 1 3 (3) (6) (10) (+) Other Expenses, net (4) 2 3 4 4 3 2 3 (+) D&A of Property & Equipment 6 6 7 6 6 7 8 (+) Interest Expense, net 3 3 3 3 4 4 6 (+) Emerging Markets (6) 1 1 1 1 0 1 0 (+) Income Tax (Benefit) Expense 2 6 4 3 5 7 5 (+) Loss on Debt Extinguishment – – – 1 – – – Adjusted EBITDA 26 43 38 33 35 43 41 Three Months Ended Three Months Ended September 30, 2021 2022 Debt, net of current maturities 310 498 (+) Current maturities of debt 18 23 (-) Cash and cash equivalents (180) (212) Net Debt 148 309