Accel Entertainment, Inc. (NYSE: ACEL) today announced certain
financial and operating results for the third quarter ended
September 30, 2021.
Highlights:
- Q3 2021 ended with 2,549 locations; an increase of 8% compared
to Q3 2020
- Q3 2021 ended with 13,384 video gaming terminals (“VGTs”); an
increase of 15% compared to Q3 2020
- Revenue of $193.4 million for Q3 2021, an increase of 43%
compared to Q3 2020
- Q3 2021 revenue per location per day increased 34% vs Q3
2020
- Net income of $10.8 million for Q3 2021; an increase of 58%
compared to Q3 2020
- Adjusted EBITDA of $37.6 million for Q3 2021, an increase of
63% compared to Q3 2020
- Q3 2021 ended with $148 million of net debt; a decrease of 13%
compared to Q3 2020
- Senior secured credit facility amended to increase borrowing
capacity from $438 million to $900 million with a new five-year
term consisting of:
- $150 million Revolving Credit Facility
- $350 million Term Loan
- $400 million Delayed Draw Term Loan
- Interest rates and covenants remain unchanged
- As of November 3, 2021, the Revolver and Delayed Draw Term Loan
were fully available
- Acquisition of Century Gaming, Inc. ("Century") on track to
close in the first half of 2022
2021 Revised Guidance: Based on another quarter of strong
performance, 2021 guidance increased to:
- End 2021 with an estimated 2,600 - 2,620 locations
- End 2021 with an estimated 13,660 -13,775 VGTs
- 2021 Revenue estimated to be $725 - $750 million
- 2021 Adjusted EBITDA[*] estimated to be $140 - $145
million
- 2021 capital expenditures estimated to be $20 - $25 million of
cash spend
- End 2021 with $110 - $115 million of net debt
Revised guidance includes the January 2021 shutdown and assumes
no acquisitions.
2022 Guidance: Due to the uncertainty on the exact timing
of the Century acquisition, 2022 guidance will be provided without
Century and pro forma assuming Century's results are included for
the full year. 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 without Century acquisition:
- End 2022 with an estimated 2,760 - 2,795 locations
- End 2022 with an estimated 14,560 - 14,750 VGTs
- 2022 Revenue estimated to be $820 - $870 million
- 2022 Adjusted EBITDA[*] estimated to be $160 - $170
million
- 2022 capital expenditures estimated to be $20 - $25 million of
cash spend
2022 guidance pro forma for Century acquisition:
- End 2022 with an estimated 3,700 – 3,800 locations
- End 2022 with an estimated 23,000 – 25,000 VGTs
- 2022 Revenue estimated to be $1.07 - $1.18 billion
- 2022 Adjusted EBITDA[*] estimated to be $182 - $198
million
- 2022 capital expenditures estimated to be $25 - $35 million of
cash spend
Accel CEO Andy Rubenstein commented, “We are pleased to report
another strong quarter marked by stellar financial results, major
business milestones and strategic location wins. These results were
primarily driven by our sixth VGT installations, the completion of
higher bet limit software upgrades and continued optimization of
our product offering, which continues to support retention of our
existing player base while yielding new customers wins. We also
increased our borrowing power with the amendment of our credit
facility, providing us the financial flexibility to continue
capturing growth across Illinois and beyond. This is truly an
exciting time for Accel and are confident our asset-light,
hyper-local business model continues to give us a unique
competitive advantage in the industry and positions us to
capitalize on the future.”
Condensed Consolidated Statements of
Operations and Other Data
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2021
2020
2021
2020
Total revenues
$
193,351
$
135,097
$
542,394
$
241,939
Operating income (loss)
18,647
8,984
53,129
(12,713
)
Income (loss) before income tax (benefit)
expense
14,743
241
36,526
(3,678
)
Net income
10,807
6,835
24,753
8,110
Other Financial Data:
Adjusted EBITDA(1)
37,631
23,098
106,427
29,192
Adjusted net income (2)
17,317
15,422
54,106
8,019
(1) Adjusted EBITDA is defined as net income plus amortization
of route and customer acquisition costs and location contracts
acquired; change in fair value of contingent earnout shares; change
in the fair value of warrants; stock-based compensation expense;
other expenses, net; tax effect of adjustments; depreciation and
amortization of property and equipment; interest expense; emerging
markets; and provision for income taxes. 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; change in fair value of contingent
earnout shares; change in the fair value of warrants; 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 Metrics
As of September 30,
2021
2020
Licensed establishments (1)
2,549
2,363
Video gaming terminals (2)
13,384
11,597
Average remaining contract term (years)
(3)
6.7
6.9
September 30,
2021
2020
Location hold-per-day – for the three
months ended(4) (in whole $)
$798
$596
Location hold-per-day – for the nine
months ended(4) (in whole $)
$815
$585
(1) Based on Scientific Games International third-party terminal
operator portal data which is updated at the end of each gaming day
and includes licensed establishments that may be temporarily closed
but still connected to the central system. This metric is utilized
by Accel to continually monitor growth from existing locations,
organic openings, acquired locations, and competitor conversions.
(2) Based on Scientific Games International third-party terminal
operator portal data which is updated at the end of each gaming day
and includes VGTs that may be temporarily shut off but still
connected to the central system. This metric is utilized by Accel
to continually monitor growth from existing locations, organic
openings, acquired locations, and competitor conversions. (3)
Calculated by determining the average expiration date of all
outstanding contracts, and then subtracting the applicable
measurement date. The IGB limited the length of contracts entered
into after February 2, 2018 to a maximum of eight years with no
automatic renewals. (4) Calculated by dividing the difference
between cash deposited in all VGTs at each licensed establishment
and tickets issued to players at each licensed establishment by the
number of locations in operation each day during the period being
measured. Then divide the calculated amount by the number of
operating days in such period. Location hold per-day for the nine
months ended September 30, 2021 is computed based on 255-eligible
days of gaming (excludes 18 non-gaming days due to the IGB mandated
COVID-19 shutdown). Location hold-per-day for the nine months ended
September 30, 2020 is computed based on 168-eligible days of gaming
(excludes 106 non-gaming days due to the IGB mandated COVID-19
shutdown).
Condensed Consolidated Statements of Cash Flows Data
Nine Months Ended September
30,
(in thousands)
2021
2020
Net cash provided by operating
activities
$
80,262
$
4,118
Net cash used in investing activities
(21,220
)
(23,148
)
Net cash (used in) provided by financing
activities
(13,610
)
72,735
Non-GAAP Financial Measures
Three Months Ended September
30,
Nine Months Ended September
30,
(in thousands)
2021
2020
2021
2020
Net income
$
10,807
$
6,835
$
24,753
$
8,110
Adjustments:
Amortization of route and customer
acquisition costs and location contracts acquired (1)
6,221
5,648
18,489
16,778
Stock-based compensation (2)
966
1,668
4,707
4,055
Loss (gain) on change in fair value of
contingent earnout shares (3)
888
3,599
6,867
(6,633
)
Loss (gain) on change in fair value of
warrants(4)
—
1,710
—
(12,574
)
Other expenses, net (5)
4,173
1,383
8,913
5,719
Tax effect of adjustments (6)
(5,738
)
(5,421
)
(9,623
)
(7,436
)
Adjusted net income
$
17,317
$
15,422
$
54,106
$
8,019
Depreciation and amortization of property
and equipment
6,518
5,361
18,820
15,299
Interest expense, net
3,016
3,434
9,736
10,172
Emerging markets (7)
1,106
54
2,369
54
Income tax expense (benefit)
9,674
(1,173
)
21,396
(4,352
)
Adjusted EBITDA
$
37,631
$
23,098
$
106,427
$
29,192
(1) Route and customer acquisition costs consist of upfront cash
payments and future cash payments to third-party sales agents to
acquire the licensed video gaming establishments 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 10 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) Loss (gain) on change in fair value of
contingent earnout shares represents a non-cash fair value
adjustment at each reporting period end related to the value of
these contingent shares. Upon achieving such contingency, shares of
Class A-2 common stock convert to Class A-1 common stock resulting
in a non-cash settlement of the obligation. (4) Loss (gain) on
change in fair value of warrants represents a non-cash fair value
adjustment at each reporting period end related to the value of
these warrants. (5) 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. (6) Calculated by excluding the
impact of the non-GAAP adjustments from the current period tax
provision calculations. (7) 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 September 30,
(in thousands)
2021
2020
Debt, net of current maturities
$
309,717
$
330,757
Plus: Current maturities of debt
18,250
18,250
Less: Cash and cash equivalents
(179,883
)
(179,108
)
Net debt
$
148,084
$
169,899
Conference Call
Accel will host an investor conference call on November 4, 2021
at 11 a.m. Central Time (12 p.m. Eastern Time) to discuss these
operating and financial results. Interested parties may join the
live webcast by registering at https://www.incommglobalevents.com/registration/q4inc/8854/accel-entertainment-q3-2021-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 market. Accel’s
business consists of the installation, maintenance and operation of
VGTs, 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 2021
guidance, including with respect to the duration and impact of the
COVID-19 crisis (including expected operating expenses related
thereto), potential acquisitions or strategic alliances, and our
estimates of number of VGTs, 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 March 16, 2020 and June 30, 2020 and between
November 19, 2020 and January 23, 2021, which suspensions could be
reinstated; 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 licensed establishment
partners and create strong and sustained player appeal; Accel’s
dependence on relationships with key manufacturers, developers and
third parties to obtain VGTs, 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 VGTs and by the slow growth of new
gaming jurisdictions; Accel’s heavy dependency on its ability to
win, maintain and renew contracts with licensed establishment
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 contemplated
transaction 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 Nevada or Montana; our ability to expand
effectively into Nevada and Montana; 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 Nevada and Montana; Century’s heavy
dependency on its ability to win, maintain and renew contracts with
licensed establishment 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.
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 (loss), and Net Debt are
not recognized terms under GAAP. These non-GAAP financial measures
excludes 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
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Revenues:
(As Restated)
(As Restated)
Net gaming
$
186,017
$
129,635
$
520,915
$
231,210
Amusement
4,010
3,031
12,338
6,123
ATM fees and other revenue
3,324
2,431
9,141
4,606
Total net revenues
193,351
135,097
542,394
241,939
Operating expenses:
Cost of revenue (exclusive of depreciation
and amortization expense shown below)
129,739
90,556
364,402
161,795
General and administrative
28,053
23,165
78,641
55,061
Depreciation and amortization of property
and equipment
6,518
5,361
18,820
15,299
Amortization of route and customer
acquisition costs and location contracts acquired
6,221
5,648
18,489
16,778
Other expenses, net
4,173
1,383
8,913
5,719
Total operating expenses
174,704
126,113
489,265
254,652
Operating income (loss)
18,647
8,984
53,129
(12,713
)
Interest expense, net
3,016
3,434
9,736
10,172
Loss (gain) on change in fair value of
contingent earnout shares
888
3,599
6,867
(6,633
)
Loss (gain) on change in fair value of
warrants
—
1,710
—
(12,574
)
Income (loss) before income tax expense
(benefit)
14,743
241
36,526
(3,678
)
Income tax expense (benefit)
3,936
(6,594
)
11,773
(11,788
)
Net income
$
10,807
$
6,835
$
24,753
$
8,110
Net income per common share:
Basic
$
0.11
$
0.08
$
0.26
$
0.10
Diluted
0.11
0.08
0.26
0.09
Weighted average number of shares
outstanding:
Basic
94,004
82,785
93,607
79,708
Diluted
94,728
83,560
94,469
80,578
Comprehensive income
Net income
$
10,807
$
6,835
$
24,753
$
8,110
Unrealized (loss) gain on investment in
convertible notes (net of income taxes of $(126) and $2,135,
respectively)
(315
)
—
5,358
—
Comprehensive income
$
10,492
$
6,835
$
30,111
$
8,110
ACCEL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share
amounts)
September 30,
2021
December 31
2020
Assets
(Unaudited)
(As Restated)
Current assets:
Cash and cash equivalents
$
179,883
$
134,451
Prepaid expenses
5,655
5,549
Income taxes receivable
723
3,341
Other current assets
11,960
8,643
Total current assets
198,221
151,984
Property and equipment, net
147,687
143,565
Other noncurrent assets:
Route and customer acquisition costs,
net
15,658
15,251
Location contracts acquired, net
152,344
167,734
Goodwill
45,754
45,754
Investment in convertible notes
37,622
30,129
Deferred income tax asset
—
3,824
Other assets
3,059
2,000
Total other noncurrent assets
254,437
264,692
Total assets
$
600,345
$
560,241
Liabilities and Stockholders’
Equity
Current liabilities:
Current maturities of debt
$
18,250
$
18,250
Current portion of route and customer
acquisition costs payable
2,018
1,608
Accrued location gaming expense
2,923
—
Accrued state gaming expense
10,300
—
Accounts payable and other accrued
expenses
9,962
23,666
Accrued compensation and related
expenses
7,679
5,853
Current portion of consideration
payable
14,392
3,013
Total current liabilities
65,524
52,390
Long-term liabilities:
Debt, net of current maturities
309,717
321,891
Route and customer acquisition costs
payable, less current portion
3,495
4,064
Consideration payable, less current
portion
13,015
20,943
Contingent earnout share liability
39,936
33,069
Warrant and other long-term
liabilities
17
13
Deferred income tax liability
4,497
—
Total long-term liabilities
370,677
379,980
Stockholders’ equity :
Preferred Stock, par value of $0.0001;
1,000,000 shares authorized; 0 shares issued and outstanding at
September 30, 2021 and December 31, 2020
—
—
Class A-1 Common Stock, par value $0.0001;
250,000,000 shares authorized; 94,042,341 shares issued and
outstanding at September 30, 2021; 93,379,508 shares issued and
outstanding at December 31, 2020
9
9
Additional paid-in capital
185,711
179,549
Accumulated other comprehensive income
5,451
93
Accumulated deficit
(27,027
)
(51,780
)
Total stockholders' equity
164,144
127,871
Total liabilities and stockholders'
equity
$
600,345
$
560,241
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211103006177/en/
Media Contact: Eric Bonach Abernathy MacGregor
212-371-5999 ejb@abmac.com
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