Accel Entertainment, Inc. (NYSE: ACEL) today announced certain
financial and operating results for the third quarter ended
September 30, 2023.
Highlights:
- Ended Q3 2023 with 3,687 locations; an increase of 5% compared
to Q3 2022
- Ended Q3 2023 with 24,016 gaming terminals; an increase of 7%
compared to Q3 2022
- Revenue of $287.5 million for Q3 2023, an increase of 8%
compared to Q3 2022
- Net income of $10.5 million for Q3 2023; a decrease of 53%
compared to Q3 2022 primarily attributable to the $1.6 million loss
on the change in fair value of the contingent earnout shares in Q3
2023 compared to the $10.4 million gain in Q3 2022
- Adjusted EBITDA of $44.1 million for Q3 2023; an increase of 7%
compared to Q3 2022
- Illinois same stores sales growth was 1% in Q3 2023
- Q3 2023 ended with $282 million of net debt; a decrease of 9%
compared to Q3 2022
- Repurchased approximately $3 million of Accel Class A-1 common
stock in Q3 2023
Accel CEO Andy Rubenstein commented, “We are pleased to deliver
another strong quarter. Our consistent growth in the face of
uncertain economic times is a testament to the resilience of our
business model. We continue to evaluate opportunities to further
expand our reach outside of Illinois and solidify our position as a
national leader in distributed gaming. We believe that our strong
balance sheet and locally focused business model offer one of the
best returns in gaming.”
Condensed Consolidated Statements of
Operations and Other Data
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2023
2022
2023
2022
Total net revenues
$
287,497
$
266,967
$
873,352
$
691,727
Operating income
25,120
23,239
81,956
71,761
Income before income tax expense
15,080
27,358
46,347
77,227
Net income
10,450
22,444
29,615
60,696
Other Financial Data:
Adjusted EBITDA(1)
44,138
41,125
136,869
119,083
Adjusted net income (2)
19,067
18,932
60,566
59,053
(1)
Adjusted EBITDA is defined as net income
plus amortization of intangible assets and route and customer
acquisition costs; stock-based compensation expense; loss (gain) on
change in fair value of contingent earnout shares; other expenses,
net; tax effect of adjustments; depreciation and amortization of
property and equipment; interest expense, net; emerging markets;
and income tax expense. For additional information on Adjusted
EBITDA and a reconciliation of net income to Adjusted EBITDA, see
“Non-GAAP Financial Measures—Adjusted EBITDA and Adjusted net
income.”
(2)
Adjusted net income is defined as net
income plus amortization of intangible assets and route and
customer acquisition costs; stock-based compensation expense; loss
(gain) on change in fair value of contingent earnout shares; other
expenses, net; and tax effect of adjustments. For additional
information on Adjusted net income and a reconciliation of net
income to Adjusted net income, see "Non-GAAP Financial
Measures—Adjusted net income and Adjusted EBITDA.”
Net Revenues
(in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Net revenues by state:
Illinois
$
212,113
$
200,914
$
647,903
$
601,735
Montana
39,362
33,456
115,088
44,282
Nevada
28,003
28,439
87,833
37,359
Other
8,019
4,158
22,528
8,351
Total net revenues
$
287,497
$
266,967
$
873,352
$
691,727
Key Business Metrics
Locations (1)
As of
September 30,
2023
2022
Illinois
2,724
2,596
Montana
611
586
Nevada
352
335
Total locations
3,687
3,517
Gaming terminals (1)
As of
September 30,
2023
2022
Illinois
15,020
14,033
Montana
6,252
5,782
Nevada
2,744
2,614
Total gaming terminals
24,016
22,429
(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)
2023
2022
Net cash provided by operating
activities
$
92,007
$
78,250
Net cash used in investing activities
(35,404
)
(168,871
)
Net cash (used in) provided by financing
activities
(50,328
)
103,898
Non-GAAP Financial Measures
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)
2023
2022
2023
2022
Net income
$
10,450
$
22,444
$
29,615
$
60,696
Adjustments:
Amortization of intangible assets and
route and customer acquisition costs (1)
5,299
5,156
15,825
12,278
Stock-based compensation (2)
2,718
1,070
6,973
4,956
Loss (gain) on change in fair value of
contingent earnout shares (3)
1,625
(10,358
)
11,063
(19,497
)
Other expenses, net (4)
1,682
3,106
5,006
7,894
Tax effect of adjustments (5)
(2,707
)
(2,486
)
(7,916
)
(7,274
)
Adjusted net income
19,067
18,932
60,566
59,053
Depreciation and amortization of property
and equipment
9,405
8,136
27,914
20,575
Interest expense, net
8,415
6,239
24,546
14,031
Emerging markets (6)
(86
)
418
(805
)
1,619
Income tax expense
7,337
7,400
24,648
23,805
Adjusted EBITDA
$
44,138
$
41,125
$
136,869
$
119,083
(1) Amortization of intangible assets and route and customer
acquisition costs consist of upfront cash payments and future cash
payments to third-party sales agents to acquire the location
partners that are not connected with a business acquisition, as
well as the amortization of other intangible assets. We amortize
the upfront cash payment over the life of the contract, including
expected renewals, beginning on the date the location goes live,
and recognizes non-cash amortization charges with respect to such
items. Future or deferred cash payments, which may occur based on
terms of the underlying contract, are generally lower in the
aggregate as compared to established practice of providing higher
upfront payments, and are also capitalized and amortized over the
remaining life of the contract. Future cash payments do not include
cash costs associated with renewing customer contracts as we do not
generally incur significant costs as a result of extension or
renewal of an existing contract. Location contracts acquired in a
business combination are recorded at fair value as part of the
business combination accounting and then amortized as an intangible
asset on a straight-line basis over the expected useful life of the
contract of 15 years. “Amortization of intangible assets and route
and customer acquisition costs” aggregates the non-cash
amortization charges relating to upfront route and customer
acquisition cost payments and location contracts acquired, as well
as the amortization of other intangible assets.
(2) Stock-based compensation consists of options, restricted
stock units, and performance-based restricted stock units.
(3) Loss (gain) on change in fair value of contingent earnout
shares represents a non-cash fair value adjustment at each
reporting period end related to the value of these contingent
shares. Upon achieving such contingency, shares of Class A-2 common
stock convert to Class A-1 common stock resulting in a non-cash
settlement of the obligation.
(4) Other expenses, net consists
of (i) non-cash expenses including the remeasurement
of contingent consideration liabilities,
(ii) non-recurring lobbying and legal expenses related to
distributed gaming expansion in current or prospective markets, and
(iii) other non-recurring expenses.
(5) Calculated by excluding the impact of
the non-GAAP adjustments from the current period tax
provision calculations.
(6) Emerging markets consist of the results, on an Adjusted
EBITDA basis, for non-core jurisdictions where our operations are
developing. Markets are no longer considered emerging when we have
installed or acquired at least 500 gaming terminals in the
jurisdiction, or when 24 months have elapsed from the date we first
install or acquire gaming terminals in the jurisdiction, whichever
occurs first. We currently view Iowa and Pennsylvania as emerging
markets. Prior to April 2023, Nebraska was considered an emerging
market. Prior to July 2022, Georgia was considered an emerging
market.
Reconciliation of Debt to Net
Debt
As of
September 30,
(in thousands)
2023
2022
Debt, net of current maturities
$
484,004
$
497,976
Plus: Current maturities of debt
28,479
23,463
Less: Cash and cash equivalents
(230,388
)
(212,063
)
Net debt
$
282,095
$
309,376
Conference Call
Accel will host an investor conference call on November 7, 2023
at 4:30 p.m. Central Time (5:30 p.m. Eastern Time) to discuss these
operating and financial results. Interested parties may join the
live webcast by registering at
https://www.netroadshow.com/events/login?show=b504ca72&confId=56166.
Registering in advance of the call will provide listeners with a
personalized link to view the webcast and an individual dial-in for
the call. This registration link to the live webcast will also be
available on Accel’s investor relations website, as well as a
replay of the webcast following completion of the call:
ir.accelentertainment.com.
About Accel
Accel believes it is the leading distributed gaming operator in
the United States on an Adjusted EBITDA basis, and a preferred
partner for local business owners in the markets Accel serves.
Accel’s business consists of the installation, maintenance and
operation of gaming terminals, redemption devices that disburse
winnings and contain automated teller machine (“ATM”)
functionality, and other amusement devices in authorized non-casino
locations such as restaurants, bars, taverns, convenience stores,
liquor stores, truck stops, and grocery stores.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical fact,
contained in this press release are forward-looking statements,
including, but not limited to, any statements regarding our
estimates of number of gaming terminals, locations, revenues,
Adjusted EBITDA and capital expenditures. The words “predict,”
“estimated,” “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “may,” “plans,” “projects,” “will,” “would,” “continue,”
and similar expressions or the negatives thereof are intended to
identify forward-looking statements. These forward-looking
statements represent our current reasonable expectations and
involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance and achievements, or
industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. We cannot guarantee the accuracy of the
forward-looking statements, and you should be aware that results
and events could differ materially and adversely from those
contained in the forward-looking statements due to a number of
factors including, but not limited to: Accel's ability to
successfully integrate its business with the business of Century
and realize the full benefits of the Century acquisition; Accel’s
ability to operate in existing markets or expand into new
jurisdictions; Accel’s ability to manage its growth effectively;
Accel’s ability to offer new and innovative products and services
that fulfill the needs of location partners and create strong and
sustained player appeal; Accel’s dependence on relationships with
key manufacturers, developers and third parties to obtain gaming
terminals, amusement machines, and related supplies, programs, and
technologies for its business on acceptable terms; the negative
impact on Accel’s future results of operations by the slow growth
in demand for gaming terminals and by the slow growth of new gaming
jurisdictions; Accel’s heavy dependency on its ability to win,
maintain and renew contracts with location partners; unfavorable
macroeconomic conditions or decreased discretionary spending due to
other factors such as increased interest rates, increased
inflation, actual or perceived instability in the U.S. and global
banking systems, high fuel rates, recessions, epidemics or other
public health issues, terrorist activity or threat thereof, civil
unrest or other macroeconomic or political uncertainties, that
could adversely affect Accel’s business, results of operations,
cash flows and financial conditions and other risks and
uncertainties indicated from time to time in documents filed or to
be filed with the Securities and Exchange Commission (“SEC”).
Accordingly, forward-looking statements, including any
projections or analysis, should not be viewed as factual and should
not be relied upon as an accurate prediction of future results. The
forward-looking statements contained in this press release are
based on our current expectations and beliefs concerning future
developments and their potential effects on Accel. These
forward-looking statements involve a number of risks, uncertainties
(some of which are beyond our control), or other assumptions that
may cause actual results or performance to be materially different
from those expressed or implied by these forward-looking
statements. These risks and uncertainties include, but are not
limited to, those factors described in the section entitled “Risk
Factors” in the Annual Report on Form 10-K filed by Accel with the
SEC, as well as Accel’s other filings with the SEC. Except as
required by law, we do not undertake publicly to update or revise
these statements, even if experience or future changes make it
clear that any projected results expressed in this or other press
releases or future quarterly reports, or company statements will
not be realized. In addition, the inclusion of any statement in
this press release does not constitute an admission by us that the
events or circumstances described in such statement are material.
We qualify all of our forward-looking statements by these
cautionary statements. In addition, the industry in which we
operate is subject to a high degree of uncertainty and risk due to
a variety of factors including those described in the section
entitled “Risk Factors” in the Annual Report on Form 10-K filed by
Accel with the SEC, as well as Accel’s other filings with the SEC.
These and other factors could cause our results to differ
materially from those expressed in this press release.
Non-GAAP Financial Information
This press release includes certain financial information not
prepared in accordance with Generally Accepted Accounting
Principles in the United States (“GAAP”), including Adjusted
EBITDA, Adjusted net income, and Net Debt. Adjusted EBITDA,
Adjusted net income, and Net Debt are non-GAAP financial measures
and are key metrics used to monitor ongoing core operations.
Management of Accel believes Adjusted EBITDA, Adjusted net income,
and Net Debt enhance the understanding of Accel’s underlying
drivers of profitability and trends in Accel’s business and
facilitates company-to-company and period-to-period comparisons,
because these non-GAAP financial measures exclude the effects of
certain non-cash items, represents certain nonrecurring items that
are unrelated to core performance, or excludes non-core operations.
Management of Accel also believes that these non-GAAP financial
measures are used by investors, analysts and other interested
parties as measures of financial performance.
Adjusted EBITDA, Adjusted net income, and Net Debt
Although Accel excludes amortization of intangible assets and
route and customer acquisition costs from Adjusted EBITDA and
Adjusted net income, Accel believes that it is important for
investors to understand that these route, customer and other
intangible assets contribute to revenue generation. Any future
acquisitions may result in amortization of intangible assets and
route and customer acquisition costs.
Adjusted EBITDA, Adjusted net income, and Net Debt are not
recognized terms under GAAP. These non-GAAP financial measures
exclude some, but not all, items that affect net income, and these
measures may vary among companies. These non-GAAP financial
measures are unaudited and have important limitations as an
analytical tool, should not be viewed in isolation and do not
purport to be alternatives to net income as indicators of operating
performance.
ACCEL ENTERTAINMENT,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Revenues:
Net gaming
$
274,123
$
255,606
$
831,054
$
662,491
Amusement
5,411
4,860
17,839
14,543
Manufacturing
3,334
2,489
9,886
3,408
ATM fees and other
4,629
4,012
14,573
11,285
Total net revenues
287,497
266,967
873,352
691,727
Operating expenses:
Cost of revenue (exclusive of depreciation
and amortization expense shown below)
198,743
185,878
604,603
473,164
Cost of manufacturing goods sold
(exclusive of depreciation and amortization expense shown
below)
2,065
1,656
5,627
2,421
General and administrative
45,183
39,796
132,421
103,634
Depreciation and amortization of property
and equipment
9,405
8,136
27,914
20,575
Amortization of intangible assets and
route and customer acquisition costs
5,299
5,156
15,825
12,278
Other expenses, net
1,682
3,106
5,006
7,894
Total operating expenses
262,377
243,728
791,396
619,966
Operating income
25,120
23,239
81,956
71,761
Interest expense, net
8,415
6,239
24,546
14,031
Loss (gain) on change in fair value of
contingent earnout shares
1,625
(10,358
)
11,063
(19,497
)
Income before income tax
expense
15,080
27,358
46,347
77,227
Income tax expense
4,630
4,914
16,732
16,531
Net income
$
10,450
$
22,444
$
29,615
$
60,696
Earnings per common share:
Basic
$
0.12
$
0.25
$
0.34
$
0.66
Diluted
0.12
0.25
0.34
0.66
Weighted average number of shares
outstanding:
Basic
85,865
89,992
86,305
91,299
Diluted
87,114
90,528
87,022
91,945
ACCEL ENTERTAINMENT,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except par value and share
amounts)
September 30,
December 31
2023
2022
Assets
(Unaudited)
Current assets:
Cash and cash equivalents
$
230,388
$
224,113
Accounts receivable, net
13,362
11,166
Prepaid expenses
8,027
7,407
Inventories
6,780
6,941
Interest rate caplets
9,927
8,555
Investment in convertible notes
—
32,065
Other current assets
14,166
8,965
Total current assets
282,650
299,212
Property and equipment, net
245,714
211,844
Noncurrent assets:
Route and customer acquisition costs,
net
19,127
18,342
Location contracts acquired, net
177,681
189,343
Goodwill
101,554
100,707
Other intangible assets, net
21,152
22,979
Interest rate caplets, net of current
9,241
11,364
Other assets
14,289
8,978
Total noncurrent assets
343,044
351,713
Total assets
$
871,408
$
862,769
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of debt
$
28,479
$
23,466
Current portion of route and customer
acquisition costs payable
1,481
1,487
Accrued location gaming expense
7,858
7,791
Accrued state gaming expense
16,965
16,605
Accounts payable and other accrued
expenses
23,067
22,302
Accrued compensation and related
expenses
9,192
10,607
Current portion of consideration
payable
5,175
7,647
Total current liabilities
92,217
89,905
Long-term liabilities:
Debt, net of current maturities
484,004
518,566
Route and customer acquisition costs
payable, less current portion
4,893
5,137
Consideration payable, less current
portion
5,319
6,872
Contingent earnout share liability
34,351
23,288
Other long-term liabilities
5,786
3,390
Deferred income tax liability, net
46,064
37,021
Total long-term liabilities
580,417
594,274
Stockholders’ equity:
Preferred Stock, par value of $0.0001;
1,000,000 shares authorized; 0 shares issued and outstanding at
September 30, 2023 and December 31, 2022
—
—
Class A-1 Common Stock, par value $0.0001;
250,000,000 shares authorized; 94,872,069 shares issued and
85,389,889 shares outstanding at September 30, 2023;
94,504,051 shares issued and 86,674,390 shares outstanding at
December 31, 2022
9
9
Additional paid-in capital
200,545
194,157
Treasury stock, at cost
(97,509
)
(81,697
)
Accumulated other comprehensive income
12,233
12,240
Accumulated earnings
83,496
53,881
Total stockholders' equity
198,774
178,590
Total liabilities and stockholders'
equity
$
871,408
$
862,769
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107089083/en/
Media: Eric Bonach H/Advisors Abernathy 212-371-5999
eric.bonach@h-advisors.global
Grafico Azioni Accel Entertainment (NYSE:ACEL)
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