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 9, 2022
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 9, 2022, the Company issued a press release announcing its financial and operating results for the second quarter ended June 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<br>Number | Description |
|---|---|
| 99.1 | Press Release dated August 9, 2022 |
| 99.2 | Accel Investor Presentation - Second Quarter 2022 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 9, 2022 | By: | /s/ Mathew Ellis |
| Mathew Ellis | ||
| Chief Financial Officer |
3
Document
Accel Entertainment Announces Q2 2022 Operating Results
Chicago, IL – August 9, 2022 – Accel Entertainment, Inc. (NYSE: ACEL) today announced certain financial and operating results for the second quarter ended June 30, 2022.
Highlights:
•Revenue of $227.9 million for Q2 2022, an increase of 13% compared to Q2 2021
•Q2 2022 Illinois revenue per location per day was essentially flat when compared to Q2 2021
•Net income of $22.5 million for Q2 2022; an increase of 81% compared to Q2 2021
•Adjusted EBITDA of $42.7 million for Q2 2022, was essentially flat when compared to Q2 2021
•Q2 2022 ended with 3,489 locations; an increase of 38% compared to Q2 2021
•Q2 2022 ended with 22,128 gaming terminals; an increase of 68% compared to Q2 2021
•Q2 2022 ended with $282 million of net debt; an increase of 69% compared to Q2 2021 due to borrowings of $160 million on our credit facility in Q2 2022 to finance the acquisition of Century Gaming, Inc. ("Century")
•Repurchased $25 million of Accel Class A-1 common stock in Q2 2022
•On May 12, 2022, the Georgia Lottery extended the Gift Card Pilot Program to all Class B locations
•Acquisition of Century closed on June 1, 2022
•During June 2022, Accel commenced operations in Nebraska. On August 1, 2022, Accel acquired VVS, Inc., an amusement operator for $9.5 million
Updated Guidance:
With the Century acquisition closed, Accel is providing updated guidance for 2022. 2022 guidance will be provided with Century's results included as of the acquisition date and pro forma assuming Century's results are included for the full year. The pro forma guidance is presented for illustrative purposes only and is not necessarily indicative of the results that would have occurred had the acquisition been completed on January 1, 2022 or that may occur in the future. 2022 guidance also assumes Georgia will no longer be an "emerging market" for the second half of 2022 because it has operated for more than 24 months. Accordingly, the results from Georgia will not be added back to our Adjusted EBITDA during the second half 2022.
2022 guidance:
•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 $25 - $30 million of cash spend
2022 guidance pro forma for Century acquisition:
•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 $1.07 - $1.13 billion
•2022 Adjusted EBITDA[*] estimated to be $170 - $175 million
•2022 capital expenditures estimated to be $30 - $35 million of cash spend
Accel CEO Andy Rubenstein commented, “We are pleased with our performance this quarter and are focused on executing our growth strategy. We remain confident that our locally-focused business model creates a platform to outperform in difficult times and thrive under normal circumstances. We aim to leverage our proven business model and extremely strong financial position to continue our expansion and return capital to shareholders. ”
| Condensed Consolidated Statements of Operations and Other Data | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||
| Total revenues | $ | 227,869 | $ | 201,974 | $ | 424,760 | $ | 349,043 | |||
| Operating income | 27,315 | 24,927 | 48,522 | 34,482 | |||||||
| Income before income tax expense | 29,246 | 18,369 | 49,869 | 21,783 | |||||||
| Net income | 22,464 | 12,445 | 38,252 | 13,946 | |||||||
| Other Financial Data: | |||||||||||
| Adjusted EBITDA(1) | 42,716 | 42,983 | 77,958 | 68,796 | |||||||
| Adjusted net income (2) | 22,516 | 25,732 | 40,121 | 36,789 | (1) | Adjusted EBITDA is defined as net income plus amortization of route and customer acquisition costs and location contracts acquired; (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 route and customer acquisition costs and location contracts acquired; (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.” |
Key Business Metrics
| Locations (1) | As of June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||
| Illinois | 2,572 | 2,527 | ||||||
| Montana | 585 | — | ||||||
| Nevada | 332 | — | ||||||
| Total locations | 3,489 | 2,527 | ||||||
| Terminals (2) | As of June 30, | |||||||
| --- | --- | --- | ||||||
| 2022 | 2021 | |||||||
| Illinois | 13,801 | 13,177 | ||||||
| Montana | 5,742 | — | ||||||
| Nevada | 2,585 | — | ||||||
| Total terminals | 22,128 | 13,177 | ||||||
| (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. | |||||||
| --- | --- | |||||||
| (2) | Based on a combination of third-party portal data and data from our internal systems. This metric is utilized by Accel to continually monitor growth from existing locations, organic openings, acquired locations, and competitor conversions. | |||||||
| Condensed Consolidated Statements of Cash Flows Data | ||||||||
| --- | --- | --- | --- | --- | ||||
| Six Months Ended June 30, | ||||||||
| (in thousands) | 2022 | 2021 | ||||||
| Net cash provided by operating activities | $ | 41,211 | $ | 54,158 | ||||
| Net cash used in investing activities | (137,267) | (13,758) | ||||||
| Net cash provided by financing activities | 117,438 | 3,657 | ||||||
| Non-GAAP Financial Measures | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||
| Net income | $ | 22,464 | $ | 12,445 | $ | 38,252 | $ | 13,946 |
| Adjustments: | ||||||||
| Amortization of route and customer acquisition costs and location contracts acquired (1) | 3,574 | 6,162 | 7,122 | 12,268 | ||||
| Stock-based compensation (2) | 2,281 | 2,148 | 3,886 | 3,741 | ||||
| (Gain) loss on change in fair value of contingent earnout shares (3) | (5,722) | 3,182 | (9,139) | 5,979 | ||||
| Other expenses, net (4) | 2,232 | 2,687 | 4,788 | 4,740 | ||||
| Tax effect of adjustments (5) | (2,313) | (892) | (4,788) | (3,885) | ||||
| Adjusted net income | $ | 22,516 | $ | 25,732 | $ | 40,121 | $ | 36,789 |
| Depreciation and amortization of property and equipment | 6,598 | 6,313 | 12,439 | 12,302 | ||||
| Interest expense, net | 3,791 | 3,376 | 7,792 | 6,720 | ||||
| Emerging markets (6) | 716 | 746 | 1,201 | 1,263 | ||||
| Income tax expense | 9,095 | 6,816 | 16,405 | 11,722 | ||||
| Adjusted EBITDA | $ | 42,716 | $ | 42,983 | $ | 77,958 | $ | 68,796 |
(1) Amortization of route and customer acquisition costs and location contracts acquired 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. 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 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) (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.
| Reconciliation of Debt to Net Debt | ||||
|---|---|---|---|---|
| As of June 30, | ||||
| (in thousands) | 2022 | 2021 | ||
| Debt, net of current maturities | $ | 478,635 | $ | 326,775 |
| Plus: Current maturities of debt | 23,460 | 18,250 | ||
| Less: Cash and cash equivalents | (220,168) | (178,508) | ||
| Net debt | $ | 281,927 | $ | 166,517 |
Conference Call
Accel will host an investor conference call on August 10, 2022 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time) to discuss these operating and financial results. Interested parties may join the live webcast by registering at https://ige.netroadshow.com/registration/q4inc/11350/accel-entertainment-q2-2022-earnings-call/. 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, including with respect to the duration and impact of the COVID-19 pandemic (including expected operating expenses related thereto), potential acquisitions or strategic alliances, and our estimates of number of gaming terminals, 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 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 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 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”).
Anticipated effects or benefits from the Century acquisition may not ultimately occur, including expected revenues; effective integration of Century’s operations, establishments and terminals with our own; integration of new technology to our own portfolio; and integration of player rewards programs into our own system or expansion of those rewards programs in other US markets. 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 Century’s business, operations and financial condition, including as a result of any suspension of gaming operations in Montana or Nevada; our ability to expand effectively into Montana or Nevada; our ability to manage growth effectively; our ability to offer new and innovative products and services that fulfill the needs of Century’s establishment partners and create strong and sustained player appeal; Century’s dependence on relationships with key manufacturers, developers and third parties; the negative impact on Century’s future results of operations by the slow growth in demand for gaming terminals and by slow growth of gaming in Montana or Nevada; Century’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 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 or Century’s business, results of operations, cash flows and financial conditions and other risks and uncertainties.
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
Although Accel excludes amortization of route and customer acquisition costs and location contracts acquired from Adjusted EBITDA and Adjusted net income, 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, 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.
[*] 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
(Unaudited)
| (In thousands, except per share amounts) | Three Months Ended<br>June 30, | Six Months Ended<br>June 30, | ||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Revenues: | ||||||||
| Net gaming | $ | 218,423 | $ | 194,434 | $ | 406,885 | $ | 334,898 |
| Amusement | 4,693 | 4,279 | 9,683 | 8,328 | ||||
| Manufacturing | 919 | — | 919 | — | ||||
| ATM fees and other revenue | 3,834 | 3,261 | 7,273 | 5,817 | ||||
| Total net revenues | 227,869 | 201,974 | 424,760 | 349,043 | ||||
| Operating expenses: | ||||||||
| Cost of revenue (exclusive of depreciation and amortization expense shown below) | 154,666 | 135,772 | 287,286 | 234,663 | ||||
| Cost of good sold (exclusive of depreciation and amortization expense shown below) | 765 | — | 765 | — | ||||
| General and administrative | 32,719 | 26,113 | 63,838 | 50,588 | ||||
| Depreciation and amortization of property and equipment | 6,598 | 6,313 | 12,439 | 12,302 | ||||
| Amortization of route and customer acquisition costs and location contracts acquired | 3,574 | 6,162 | 7,122 | 12,268 | ||||
| Other expenses, net | 2,232 | 2,687 | 4,788 | 4,740 | ||||
| Total operating expenses | 200,554 | 177,047 | 376,238 | 314,561 | ||||
| Operating income | 27,315 | 24,927 | 48,522 | 34,482 | ||||
| Interest expense, net | 3,791 | 3,376 | 7,792 | 6,720 | ||||
| (Gain) loss on change in fair value of contingent earnout shares | (5,722) | 3,182 | (9,139) | 5,979 | ||||
| Income before income tax expense | 29,246 | 18,369 | 49,869 | 21,783 | ||||
| Income tax expense | 6,782 | 5,924 | 11,617 | 7,837 | ||||
| Net income | $ | 22,464 | $ | 12,445 | $ | 38,252 | $ | 13,946 |
| Net income per common share: | ||||||||
| Basic | $ | 0.24 | $ | 0.13 | $ | 0.41 | $ | 0.15 |
| Diluted | 0.24 | 0.13 | 0.41 | 0.15 | ||||
| Weighted average number of shares outstanding: | ||||||||
| Basic | 92,328 | 93,617 | 92,484 | 93,452 | ||||
| Diluted | 93,001 | 94,668 | 93,195 | 94,382 | ||||
| Comprehensive income | ||||||||
| Net income | $ | 22,464 | $ | 12,445 | $ | 38,252 | $ | 13,946 |
| Unrealized gain on investment in convertible notes (net of income taxes of $2,073 and $2,260, respectively) | — | 5,204 | — | 5,673 | ||||
| Unrealized gain on interest rate caplets (net of income taxes of $760 and $2,694, respectively) | 1,907 | — | 6,771 | — | ||||
| Comprehensive income | $ | 24,371 | $ | 17,649 | $ | 45,023 | $ | 19,619 |
ACCEL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| (In thousands, except par value and share amounts) | June 30, | December 31 | ||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Assets | (Unaudited) | |||
| Current assets: | ||||
| Cash and cash equivalents | $ | 220,168 | $ | 198,786 |
| Accounts receivable, net | 9,214 | 5,121 | ||
| Income taxes receivable | 1,664 | — | ||
| Inventories | 6,137 | — | ||
| Prepaid expenses | 8,362 | 6,998 | ||
| Interest rate caplets | 3,522 | — | ||
| Investment in convertible notes | 32,065 | 32,065 | ||
| Other current assets | 6,869 | 5,025 | ||
| Total current assets | 288,001 | 247,995 | ||
| Property and equipment, net | 189,637 | 152,251 | ||
| Other noncurrent assets: | ||||
| Route and customer acquisition costs, net | 17,678 | 15,913 | ||
| Location contracts acquired, net | 184,519 | 150,672 | ||
| Goodwill | 99,490 | 46,199 | ||
| Other intangible assets | 24,400 | — | ||
| Interest rate caplets, net of current | 9,427 | — | ||
| Other assets | 3,427 | 3,043 | ||
| Total other noncurrent assets | 338,941 | 215,827 | ||
| Total assets | $ | 816,579 | $ | 616,073 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Current maturities of debt | $ | 23,460 | $ | 17,500 |
| Current portion of route and customer acquisition costs payable | 2,794 | 2,079 | ||
| Accrued location gaming expense | 3,000 | 3,969 | ||
| Accrued state gaming expense | 13,483 | 11,441 | ||
| Accounts payable and other accrued expenses | 22,173 | 14,616 | ||
| Accrued compensation and related expenses | 9,062 | 8,886 | ||
| Current portion of consideration payable | 12,025 | 13,344 | ||
| Total current liabilities | 85,997 | 71,835 | ||
| Long-term liabilities: | ||||
| Debt, net of current maturities | 478,635 | 324,022 | ||
| Route and customer acquisition costs payable, less current portion | 4,111 | 3,953 | ||
| Consideration payable, less current portion | 11,106 | 12,706 | ||
| Contingent earnout share liability | 33,692 | 42,831 | ||
| Warrant and other long-term liabilities | 440 | 17 | ||
| Deferred income tax liability | 28,723 | 2,248 | ||
| Total long-term liabilities | 556,707 | 385,777 | ||
| Stockholders’ equity : | ||||
| Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021 | — | — | ||
| Class A-1 Common Stock, par value $0.0001; 250,000,000 shares authorized; 94,359,417 shares issued and 90,759,331 shares outstanding at June 30, 2022; 94,111,868 shares issued and 93,410,563 shares outstanding at December 31, 2021 | 9 | 9 | ||
| Additional paid-in capital | 191,190 | 187,656 | ||
| Accumulated other comprehensive income | 6,771 | — | ||
| Accumulated earnings (deficit) | 18,031 | (20,221) | ||
| Total stockholders' equity | 173,875 | 158,461 | ||
| Total liabilities and stockholders' equity | $ | 816,579 | $ | 616,073 |
9
accel2q22resultspresenta
Second Quarter 2022 Earnings Presentation August 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, and any 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, and our 2022 guidance, including with respect to the duration and impact of the COVID-19 pandemic (including expected operating expenses related thereto), potential acquisitions or strategic alliances, and our estimates of number of gaming terminals, 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. 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 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 Gaming, Inc. ("Century") and realize the benefits of the Century acquisition; Accel’s ability to operate in existing markets or expand into new jurisdictions; Accel’s ability to manage its growth effectively; Accel’s ability to offer new and innovative products and services that fulfill the needs of location partners and create strong and sustained player appeal; Accel’s dependence on relationships with key manufacturers, developers and third parties to obtain gaming terminals, amusement machines, and related supplies, programs, and technologies for its business on acceptable terms; the negative impact on Accel’s future results of operations by the slow growth in demand for 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 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"). Anticipated effects or benefits from the Century Acquisition may not ultimately occur, including expected revenues; effective integration of Century’s operations, establishments and terminals with our own; integration of new technology to our own portfolio; and integration of player rewards programs into our own system or expansion of those rewards programs in other US markets. 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 Century’s business, operations and financial condition, including as a result of any suspension of gaming operations in Montana and Nevada; our ability to expand effectively into Montana and Nevada; our ability to manage growth effectively; our ability to offer new and innovative products and services that fulfill the needs of Century’s establishment partners and create strong and sustained player appeal; Century’s dependence on relationships with key manufacturers, developers and third parties; the negative impact on Century’s future results of operations by the slow growth in demand for gaming terminals and by slow growth of gaming in Montana and Nevada; Century’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 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 or Century’s business, results of operations, cash flows and financial conditions and other risks and uncertainties. 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, Adjusted net income, and Net Debt. Adjusted EBITDA is defined as net income plus amortization of route and customer acquisition costs and location contracts acquired; (gain) loss on change in fair value of contingent earnout shares; (gain) loss on 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; income tax expense; and loss on debt extinguishment. Adjusted net income is defined as net income (loss) plus amortization of route and customer acquisition costs and location contracts acquired; stock-based compensation expense; (gain) loss on change in fair value of contingent earnout shares; (gain) loss on change in fair value of warrants; 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. 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, 2022, Accel owned and operated 22,128 terminals across 3,489 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 $282mm of Net Debt(3) Gaming legislation provides significant embedded opportunity for additional growth $353 $458 $658 $882 $1,125 $1,383 $2,030 $2,248 2015 2016 2017 2018 2019 2020 2021 2022 YTD
Recent Highlights • Illinois Q2 2022 same store sales was essentially flat compared to Q2 2021 • On May 12th, the Georgia Lottery extended the Gift Card Pilot Program to all locations − Roll-out in process • Century acquisition closed on June 1st • During June, Accel commenced operations in Nebraska − On August 1st, Accel purchased VVS, Inc., an amusement operator, for $9.5 million • Repurchased $25 million of Accel A-1 Common Stock in Q2 2022 − Since Accel’s repurchase program began in November 2021, Accel has repurchased over $55 million of Accel A-1 Common Stock through July 31, 2022 4
$26 $43 $38 $33$35 $43 Q1 Q2 Q3 Q4 2021 2022 $147 $202 $193 $192$197 $228 Q1 Q2 Q3 Q4 2021 2022 Accel Quarterly KPIs 1. Adjusted EBITDA is a non-GAAP financial measure that may not be comparable to other similarly titled measures of other companies. Accel does not consider this non-GAAP measure in isolation or as an alternative to similar financial measures determined in accordance with GAAP. For more information with respect to these Non-GAAP financial measures, see page 2 “Use of Non-GAAP Financial Measures,” and for a reconciliation of each of these measures to their most directly comparable GAAP measure, see page 10 "Non-GAAP to GAAP Reconciliation.” Locations (#) Terminals (#) Revenue ($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 2,572 585 332 3,489 Q1 Q2 Q3 Q4 2021 IL 2022 IL 2022 MT 2022 NV 12,720 13,177 13,384 13,639 13,663 13,801 5,742 2,585 22,128 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.” $ in millions Q2 2021 Q2 2022 % Change YTD 2021 YTD 2022 % Change Locations 2,527 3,489 38% 2,527 3,489 38% Terminals 13,177 22,128 68% 13,177 22,128 68% Revenue $202 $228 13% $349 $425 22% Adj EBITDA(1) $43 $43 -1% $69 $78 13% CapEx(2) $9 $6 -27% $11 $13 21% Net Debt(3) $167 $282 69% $167 $282 69%
Revised 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.” 2022 Pro Forma guidance includes full-year operating results of Century. Pro Forma guidance is presented for illustrative purposes only and is not necessarily indicative of the results that would have occurred had the acquisition been completed on January 1, 2022 or that may occur in the future. 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. $ in millions 2022 Original Guidance(1) (Pro Forma Century) 2022 Revised Guidance(1) (Pro Forma Century) 2022 Revised Guidance(1) Locations 3,700 – 3,800 3,550 – 3,600 3,550 – 3,600 Terminals 23,000 – 25,000 22,700 – 23,200 22,700 – 23,200 Revenue $1,065 – $1,180 $1,070 – $1,130 $960 – $990 Adj EBITDA(2) $182 – $198 $170 – $175 $160 – $165 CapEx(3) $25 – $35 $30 – $35 $25 – $30
Historical Financial Summary 8 $ in millions 1. Cost of Revenue and Cost of 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. Q2 YTD YoY YoY 2018 2019 2020 2021 2021 2022 Growth 2021 2022 Growth No. of Locations 1,686 2,312 2,435 2,584 2,527 3,489 38% 2,527 3,489 38% No. of Terminals 7,649 10,499 12,247 13,639 13,177 22,128 68% 13,177 22,128 68% Net Gaming Revenue 322 411 301 706 194 218 12% 335 407 21% Other Revenue 13 18 16 29 8 9 25% 14 18 26% Gross Revenues 335 429 316 735 202 228 13% 349 425 22% % YoY Growth 35% 28% (26%) 132% 13% 22% Less: Cost of Revenue and Cost of Goods Sold (1) (217) (282) (211) (494) (136) (155) 14% (235) (288) 23% Gross Profit 118 147 105 241 66 72 9% 114 137 20% % Margin 35% 34% 33% 33% 33% 32% 33% 32% Less: G&A Expenses (54) (69) (77) (111) (26) (33) 25% (51) (64) 26% EBITDA 63 77 28 130 40 40 (1%) 64 73 14% Adjusted EBITDA (2) 64 80 34 140 43 43 (1%) 69 78 13% % Margin 19% 19% 11% 19% 21% 19% 20% 18% % YoY Growth 36% 25% (57%) 312% (1%) 13% Less: D&A of Property & Equipment (21) (26) (21) (25) (6) (7) (12) (12) Less: Amortization of Op Routes (15) (18) (23) (22) (6) (4) (12) (7) EBIT 28 33 (16) 83 28 30 39 53 Less: Other Expenses, net (3) (20) (9) (13) (3) (2) (5) (5) Less: Interest Expense, net (10) (13) (14) (13) (3) (4) (7) (8) Less: Income tax benefit (expense) (4) (5) 17 (15) (6) (7) (8) (12) Less: Gain (loss) on change in fair value of contingent earnout shares (3) -- (10) 8 (10) (3) 6 (6) 9 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 12 22 14 38 Adjusted Net Income 23 23 6 71 26 23 37 40 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, 2021 June 30, 2022 Assets Current Assets: Cash and cash equivalents $199 $220 Other current assets $49 $68 Total current assets $248 $288 Property and equipment, net $152 $190 Route and customer acquisition costs, net $16 $18 Location contracts acquired, net $151 $185 Goodwill $46 $99 Other assets $3 $37 Total assets $616 $817 Liabilities and Stockholders' Equity Current liab ilities: Short term debt and current maturities $18 $23 Accrued state and location gaming expense $15 $16 Other current liabilities $39 $46 Total current liabilities $72 $86 Long-term liab ilities: Long-term debt $324 $479 Contingent earnout share liability $43 $34 Other liabilities $19 $44 Total liabilities $458 $643 Total stockholders' equity $158 $174 Total liabilities and stockholders' equity $616 $817
Non-GAAP to GAAP Reconciliation 10 1. Stock-based compensation consists of options, restricted stock units and warrants. 2. 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. 3. 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. 4. Calculated by excluding the impact of the non-GAAP adjustments from the current period tax provision calculations. 5. 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. 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.f $ in millions 2018 2019 2020 2021 2021 2022 2021 2022 Reported Net Income (Loss) 11 (37) (0) 32 12 22 14 38 (+) Amortization of Op Routes 15 18 23 22 6 4 12 7 (+) Stock Based Comp (1) 0 2 6 6 2 2 4 4 (+) (Gain) loss on change in fair value of contingent earnout shares (2) – 10 (8) 10 3 (6) 6 (9) (+) (Gain) loss on change in fair value of warrants (3) – 21 (13) – – – – – (+) Other Expenses, net 3 20 9 13 3 2 5 5 (+) Tax effect of adjustments (4) (6) (11) (10) (11) (1) (2) (4) (5) Adjusted Net Income 23 23 6 71 26 23 37 40 (+) D&A of Property & Equipment 21 26 21 25 6 7 12 12 (+) Interest Expense, net 10 13 14 13 3 4 7 8 (+) Emerging Markets (5) – – 1 3 1 1 1 1 (+) Income Tax (Benefit) Expense 10 17 (7) 26 7 9 12 16 (+) Loss on debt extinguishment – 1 – 1 – – – – Adjusted EBITDA 64 80 34 140 43 43 69 78 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, 2021 2021 2021 2021 2022 2022 Reported Net Income (Loss) 2 12 11 7 16 22 (+) Amortization of Op Routes 6 6 6 4 4 4 (+) Stock Based Comp (1) 2 2 1 2 2 2 (+) (Gain) loss on change in fair value of contingent earnout shares (2) 3 3 1 3 (3) (6) (+) Other Expenses, net 2 3 4 4 3 2 (+) D&A of Property & Equipment 6 6 7 6 6 7 (+) Interest Expense, net 3 3 3 3 4 4 (+) Emerging Markets (5) 1 1 1 1 0 1 (+) Income Tax (Benefit) Expense 2 6 4 3 5 7 (+) Loss on Debt Extinguishment – – – 1 – – Adjusted EBITDA 26 43 38 33 35 43 Three Months Ended Three Months Ended June 30, 2021 2022 Debt, net of current maturities 327 479 (+) Current maturities of debt 18 23 (-) Cash and cash equivalents (179) (220) Net Debt 167 282