ACEL Accel Entertainment Inc

Accel Entertainment, Inc. (NYSE: ACEL) today announced certain financial and operating results for the three-months and year ended December 31, 2023.

Highlights:

• Ended 2023 with 3,961 locations; an increase of 6% compared to 2022; excluding Nebraska, locations increased 3% compared to 2022
• Ended 2023 with 25,083 gaming terminals, an increase of 7% compared to 2022; excluding Nebraska, gaming terminals increased 5% compared to 2022
• Another record year for Revenue and Adjusted EBITDA
• Revenue of $297 million for Q4 2023 and $1.2 billion for YE 2023
• Net income of $16 million for Q4 2023 and $46 million for YE 2023
• Adjusted EBITDA of $45 million for Q4 2023 and $181 million for YE 2023
• Illinois same store sales growth was 1% for Q4 2023 and 3% for YE 2023
• 2023 ended with $281 million of net debt, a decrease of 12% compared to 2022
• Repurchased $14 million of Accel Class A-1 common stock for Q4 2023 and $30 million for YE 2023

Accel CEO Andy Rubenstein commented, “I am excited to report that Accel had another record-setting year in 2023. Our continued success demonstrates the long-term viability of focusing on the local gaming market. We continue to explore opportunities throughout the country to expand our reach as an industry leader and remain committed to providing value and positive returns to our investors.”

Consolidated Statements of Operations and Other Data

(in thousands)

Three Months Ended December 31,

 

Year Ended December 31,

 

2023

 

2022

 

2023

 

2022

Total net revenues

$

297,068

 

$

278,070

 

$

1,170,420

 

$

969,797

Operating income

 

25,451

 

 

25,094

 

 

107,407

 

 

96,855

Income before income tax expense

 

19,377

 

 

17,535

 

 

65,724

 

 

94,762

Net income

 

15,988

 

 

13,406

 

 

45,603

 

 

74,102

Other Financial Data:

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

44,577

 

 

43,309

 

 

181,445

 

 

162,392

Adjusted net income (2)

 

21,953

 

 

20,822

 

 

82,520

 

 

79,875

(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, 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; (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 December 31,

 

Year Ended December 31,

 

2023

 

2022

 

2023

 

2022

Total net revenues by state:

 

 

 

 

 

 

 

Illinois

$

219,297

 

$

206,917

 

$

867,200

 

$

808,652

Montana

 

39,314

 

 

35,357

 

 

154,402

 

 

79,639

Nevada

 

29,241

 

 

29,630

 

 

117,074

 

 

66,989

Nebraska

 

5,830

 

 

3,168

 

 

19,043

 

 

5,217

All other

 

3,386

 

 

2,998

 

 

12,701

 

 

9,300

Total net revenues

$

297,068

 

$

278,070

 

$

1,170,420

 

$

969,797

Key Business Metrics

Locations (1)

As of December 31,

 

2023

 

2022

Illinois

2,762

 

2,648

Montana

609

 

610

Nevada

352

 

340

Nebraska

238

 

143

Total locations

3,961

 

3,741

Gaming terminals (1)

As of December 31,

 

2023

 

2022

Illinois

15,276

 

14,397

Montana

6,276

 

6,108

Nevada

2,704

 

2,645

Nebraska

827

 

391

Total gaming terminals

25,083

 

23,541

(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.

Consolidated Statements of Cash Flows Data

 

Year Ended December 31,

(in thousands)

2023

 

2022

 

 

 

 

Net cash provided by operating activities

$

132,530

 

 

$

107,999

 

Net cash used in investing activities

 

(59,793

)

 

 

(189,263

)

Net cash (used in) provided by financing activities

 

(35,239

)

 

 

106,591

 

Non-GAAP Financial Measures

 

Three Months Ended December 31,

 

Year Ended December 31,

(in thousands)

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Net income

$

15,988

 

 

$

13,406

 

 

$

45,603

 

 

$

74,102

 

Adjustments:

 

 

 

 

 

 

 

Amortization of intangible assets and route and customer acquisition costs(1)

 

5,386

 

 

 

5,206

 

 

 

21,211

 

 

 

17,484

 

Stock-based compensation(2)

 

2,443

 

 

 

1,884

 

 

 

9,416

 

 

 

6,840

 

(Gain) loss on change in fair value of contingent earnout shares(3)

 

(2,524

)

 

 

(47

)

 

 

8,539

 

 

 

(19,544

)

Other expenses, net(4)

 

1,446

 

 

 

1,426

 

 

 

6,453

 

 

 

9,320

 

Tax effect of adjustments(5)

 

(786

)

 

 

(1,053

)

 

 

(8,702

)

 

 

(8,327

)

Adjusted net income

 

21,953

 

 

 

20,822

 

 

 

82,520

 

 

 

79,875

 

Depreciation and amortization of property and equipment

 

9,992

 

 

 

8,720

 

 

 

37,906

 

 

 

29,295

 

Interest expense, net

 

8,598

 

 

 

7,606

 

 

 

33,144

 

 

 

21,637

 

Emerging markets(6)

 

(142

)

 

 

979

 

 

 

(948

)

 

 

2,598

 

Income tax expense

 

4,176

 

 

 

5,182

 

 

 

28,823

 

 

 

28,987

 

Adjusted EBITDA

$

44,577

 

 

$

43,309

 

 

$

181,445

 

 

$

162,392

 

(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, performance-based 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 certain exchange conditions, 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 December 31,

(in thousands)

2023

 

2022

Debt, net of current maturities

$

514,091

 

 

$

518,566

 

Plus: Current maturities of debt

 

28,483

 

 

 

23,466

 

Less: Cash and cash equivalents

 

(261,611

)

 

 

(224,113

)

Net debt

$

280,963

 

 

$

317,919

 

Conference Call

Accel will host an investor conference call on February 28, 2024 at 4:30 p.m. Central time (5:30 p.m. Eastern time) to discuss these financial and operating results. Interested parties may join the live webcast by registering at https://www.netroadshow.com/events/login?show=6a462f7f&confId=59904 or accessing the webcast via the company’s investor relations website: ir.accelentertainment.com. Following completion of the call, a replay of the webcast will be posted on Accel’s investor relations website.

About Accel

Accel is a leading distributed gaming operator in the United States and a preferred partner for local business owners in the markets it serves. Accel offers turnkey full-service gaming solutions to authorized non-casino locations such as bars, restaurants, convenience stores, truck stops, and fraternal and veteran establishments across the country. Accel installs, maintains, operates and services gaming terminals and related equipment for its location partners as well as redemption devices, stand-alone ATMs and amusement devices, including jukeboxes, dartboards, pool tables, and other entertainment related equipment. Accel also designs and manufactures gaming terminals and related equipment.

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 operate in existing markets or expand into new jurisdictions; 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 interest rate volatility, persistent 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. CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Years ended December 31,

 

2023

 

2022

 

2021

Revenues:

 

 

 

 

 

Net gaming

$

1,113,573

 

$

925,009

 

 

$

705,784

Amusement

 

23,973

 

 

21,106

 

 

 

16,667

Manufacturing

 

13,353

 

 

7,621

 

 

 

—

ATM fees and other

 

19,521

 

 

16,061

 

 

 

12,256

Total net revenues

 

1,170,420

 

 

969,797

 

 

 

734,707

Operating expenses:

 

 

 

 

 

Cost of revenue (exclusive of depreciation and amortization expense shown below)

 

809,524

 

 

666,126

 

 

 

494,032

Cost of manufacturing goods sold (exclusive of depreciation and amortization expense shown below)

 

7,671

 

 

4,775

 

 

 

—

General and administrative

 

180,248

 

 

145,942

 

 

 

110,818

Depreciation and amortization of property and equipment

 

37,906

 

 

29,295

 

 

 

24,636

Amortization of intangible assets and route and customer acquisition costs

 

21,211

 

 

17,484

 

 

 

22,040

Other expenses, net

 

6,453

 

 

9,320

 

 

 

12,989

Total operating expenses

 

1,063,013

 

 

872,942

 

 

 

664,515

Operating income

 

107,407

 

 

96,855

 

 

 

70,192

Interest expense, net

 

33,144

 

 

21,637

 

 

 

12,702

Loss (gain) on change in fair value of contingent earnout shares

 

8,539

 

 

(19,544

)

 

 

9,762

Loss on debt extinguishment

 

—

 

 

—

 

 

 

1,152

Income before income tax expense

 

65,724

 

 

94,762

 

 

 

46,576

Income tax expense

 

20,121

 

 

20,660

 

 

 

15,017

Net income

$

45,603

 

$

74,102

 

 

$

31,559

Earnings per common share:

 

 

 

 

 

Basic

$

0.53

 

$

0.82

 

 

$

0.34

Diluted

 

0.53

 

 

0.81

 

 

 

0.33

Weighted average number of shares outstanding:

 

 

 

 

 

Basic

 

85,949

 

 

90,629

 

 

 

93,781

Diluted

 

86,803

 

 

91,229

 

 

 

94,638

ACCEL ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share amounts)

December 31,

 

2023

 

2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

261,611

 

 

$

224,113

 

Accounts receivable, net

 

13,467

 

 

 

11,166

 

Prepaid expenses

 

6,287

 

 

 

7,407

 

Inventories

 

7,681

 

 

 

6,941

 

Interest rate caplets

 

8,140

 

 

 

8,555

 

Investment in convertible notes

 

—

 

 

 

32,065

 

Other current assets

 

15,408

 

 

 

8,965

 

Total current assets

 

312,594

 

 

 

299,212

 

Property and equipment, net

 

260,813

 

 

 

211,844

 

Noncurrent assets:

 

 

 

Route and customer acquisition costs, net

 

19,188

 

 

 

18,342

 

Location contracts acquired, net

 

176,311

 

 

 

189,343

 

Goodwill

 

101,554

 

 

 

100,707

 

Other intangible assets, net

 

20,542

 

 

 

22,979

 

Interest rate caplets, net of current

 

4,871

 

 

 

11,364

 

Other assets

 

17,020

 

 

 

8,978

 

Total noncurrent assets

 

339,486

 

 

 

351,713

 

Total assets

$

912,893

 

 

$

862,769

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current maturities of debt

$

28,483

 

 

$

23,466

 

Current portion of route and customer acquisition costs payable

 

1,505

 

 

 

1,487

 

Accrued location gaming expense

 

9,350

 

 

 

7,791

 

Accrued state gaming expense

 

18,364

 

 

 

16,605

 

Accounts payable and other accrued expenses

 

36,012

 

 

 

22,302

 

Accrued compensation and related expenses

 

12,648

 

 

 

10,607

 

Current portion of consideration payable

 

3,288

 

 

 

7,647

 

Total current liabilities

 

109,650

 

 

 

89,905

 

Long-term liabilities:

 

 

 

Debt, net of current maturities

 

514,091

 

 

 

518,566

 

Route and customer acquisition costs payable, less current portion

 

4,955

 

 

 

5,137

 

Consideration payable, less current portion

 

4,201

 

 

 

6,872

 

Contingent earnout share liability

 

31,827

 

 

 

23,288

 

Other long-term liabilities

 

7,015

 

 

 

3,390

 

Deferred income tax liability

 

42,750

 

 

 

37,021

 

Total long-term liabilities

 

604,839

 

 

 

594,274

 

Stockholders’ equity:

 

 

 

Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2023 and December 31, 2022

 

—

 

 

 

—

 

Class A-1 Common Stock, par value $0.0001; 250,000,000 shares authorized; 95,016,960 shares issued and 84,123,385 shares outstanding at December 31, 2023; 94,504,051 shares issued and 86,674,390 shares outstanding at December 31, 2022

 

8

 

 

 

9

 

Additional paid-in capital

 

203,046

 

 

 

194,157

 

Treasury stock, at cost

 

(112,070

)

 

 

(81,697

)

Accumulated other comprehensive income

 

7,936

 

 

 

12,240

 

Accumulated earnings

 

99,484

 

 

 

53,881

 

Total stockholders' equity

 

198,404

 

 

 

178,590

 

Total liabilities and stockholders' equity

$

912,893

 

 

$

862,769

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240228919514/en/

Media: Eric Bonach Abernathy MacGregor 212-371-5999 ejb@abmac.com