Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Accel Entertainment Announces Q2 2022 Operating Results By: Accel Entertainment, Inc. via Business Wire August 09, 2022 at 16:30 PM EDT 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. ACCEL ENTERTAINMENT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended June 30, Six Months Ended 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 View source version on businesswire.com: https://www.businesswire.com/news/home/20220809006026/en/Contacts Media: Eric Bonach Abernathy MacGregor 212-371-5999 ejb@abmac.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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Accel Entertainment Announces Q2 2022 Operating Results By: Accel Entertainment, Inc. via Business Wire August 09, 2022 at 16:30 PM EDT 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. ACCEL ENTERTAINMENT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended June 30, Six Months Ended 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 View source version on businesswire.com: https://www.businesswire.com/news/home/20220809006026/en/Contacts Media: Eric Bonach Abernathy MacGregor 212-371-5999 ejb@abmac.com
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. ACCEL ENTERTAINMENT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended June 30, Six Months Ended 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 View source version on businesswire.com: https://www.businesswire.com/news/home/20220809006026/en/
