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Accel Entertainment Announces Q1 2024 Operating Results

Accel Entertainment, Inc. (NYSE: ACEL) today announced certain financial and operating results for the first quarter ended March 31, 2024.

Highlights:

  • Ended Q1 2024 with 3,987 locations; an increase of 5.1% compared to Q1 2023
  • Ended Q1 2024 with 25,321 gaming terminals; an increase of 5.6% compared to Q1 2023
  • Revenues of $301.8 million for Q1 2024; an increase of 2.9% compared to Q1 2023
  • Net income of $7.4 million for Q1 2024; a decrease of 19.2% compared to Q1 2023
  • Adjusted EBITDA of $46.2 million for Q1 2024; an increase of 0.3% compared to Q1 2023
  • Q1 2024 ended with $286 million of net debt; a decrease of 7% compared to Q1 2023
  • Repurchased approximately $6.1 million of Accel Class A-1 common stock in Q1 2024

Accel CEO Andy Rubenstein commented, “I am happy to report that we delivered another solid quarter despite some unfavorable weather early on, once again demonstrating the strength of our business model. We are cautiously optimistic about legislative trends we are seeing outside of Illinois and continue to explore opportunities to expand our national footprint. Given the strength of our balance sheet and experience with locally-focused gaming markets, we continue to believe that we offer one of the best investments in the industry.”

Condensed Consolidated Statements of Operations and Other Data

 

Three Months Ended

March 31,

(in thousands)

2024

 

2023

 

 

 

 

Total net revenues

$

301,817

 

$

293,208

Operating income

 

25,559

 

 

27,672

Income before income tax expense

 

12,183

 

 

15,182

Net income

 

7,416

 

 

9,182

Other Financial Data:

 

 

 

Adjusted EBITDA(1)

 

46,247

 

 

46,118

Adjusted net income (2)

 

19,505

 

 

21,064

(1)

 

Adjusted EBITDA is defined as net income plus amortization of intangible assets and route and customer acquisition costs; stock-based compensation expense; loss on change in fair value of contingent earnout shares; other expenses, net; tax effect of adjustments; depreciation and amortization of property and equipment; interest expense, net; emerging markets; and income tax expense. For additional information on Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA, see “Non-GAAP Financial Measures—Adjusted EBITDA and Adjusted net income.”

(2)

 

Adjusted net income is defined as net income plus amortization of intangible assets and route and customer acquisition costs; stock-based compensation expense; loss on change in fair value of contingent earnout shares; other expenses, net; and tax effect of adjustments. For additional information on Adjusted net income and a reconciliation of net income to Adjusted net income, see "Non-GAAP Financial Measures—Adjusted net income and Adjusted EBITDA.”

Net Revenues

 

 

 

 

 

 

 

(in thousands)

Three Months Ended

March 31,

 

Increase / (Decrease)

 

2024

 

2023

 

Change ($)

 

Change (%)

Net revenues by state:

 

 

 

 

 

 

 

Illinois

$

224,863

 

$

219,843

 

$

5,020

 

 

2.3

%

Montana

 

38,141

 

 

36,451

 

 

1,690

 

 

4.6

%

Nevada

 

29,209

 

 

29,961

 

 

(752

)

 

(2.5

)%

Nebraska

 

5,834

 

 

3,924

 

 

1,910

 

 

48.7

%

Other

 

3,770

 

 

3,029

 

 

741

 

 

24.5

%

Total net revenues

$

301,817

 

$

293,208

 

$

8,609

 

 

2.9

%

Key Business Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Locations (1)

As of March 31,

 

Increase / (Decrease)

 

2024

 

2023

 

Change

 

Change (%)

Illinois

2,786

 

2,663

 

123

 

4.6 %

Montana

609

 

620

 

(11)

 

(1.8) %

Nevada

355

 

345

 

10

 

2.9 %

Nebraska

237

 

165

 

72

 

43.6 %

Total locations

3,987

 

3,793

 

194

 

5.1 %

Gaming terminals (1)

As of March 31,

 

Increase / (Decrease)

 

2024

 

2023

 

Change

 

Change (%)

Illinois

15,494

 

14,546

 

948

 

6.5 %

Montana

6,280

 

6,247

 

33

 

0.5 %

Nevada

2,714

 

2,704

 

10

 

0.4 %

Nebraska

833

 

488

 

345

 

70.7 %

Total gaming terminals

25,321

 

23,985

 

1,336

 

5.6 %

 

 

 

 

 

 

 

 

Location hold-per-day (2)

Three Months Ended March 31,

 

Increase / (Decrease)

 

2024

 

2023

 

Change ($)

 

Change (%)

Illinois

$

860

 

$

887

 

$

(27

)

 

(3.0

)%

Montana

 

594

 

 

567

 

 

27

 

 

4.8

%

Nevada

 

847

 

 

866

 

 

(19

)

 

(2.2

)%

Nebraska

 

233

 

 

228

 

 

5

 

 

2.2

%

 

 

 

 

 

 

 

 

(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)

 

Location hold-per-day is calculated by dividing net gaming revenue in the period by the average number of locations. Then divide the calculated amount by the number of operational days. We utilize this metric to compare market and location performance on a normalized basis. The percent change in location hold-per-day is the underlying metric used to determine the change in same-store sales.

Condensed Consolidated Statements of Cash Flows Data

 

 

 

 

 

Three Months Ended

March 31,

 

Increase / (Decrease)

(in thousands)

 

2024

 

 

 

2023

 

 

Change ($)

 

Change (%)

Net cash provided by operating activities

$

28,750

 

 

$

37,983

 

 

$

(9,233

)

 

(24.3

)%

Net cash used in investing activities

 

(25,896

)

 

 

(23,585

)

 

 

(2,311

)

 

(9.8

)%

Net cash used in financing activities

 

(10,546

)

 

 

(9,982

)

 

 

(564

)

 

(5.7

)%

Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

Three Months Ended

March 31,

 

Increase / (Decrease)

(in thousands)

 

2024

 

 

 

2023

 

 

Change ($)

 

Change (%)

Net income

$

7,416

 

 

$

9,182

 

 

$

(1,766

)

 

(19.2

)%

Adjustments:

 

 

 

 

 

 

 

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

 

5,438

 

 

 

5,242

 

 

 

196

 

 

3.7

%

Stock-based compensation (2)

 

2,350

 

 

 

1,688

 

 

 

662

 

 

39.2

%

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

 

4,716

 

 

 

4,602

 

 

 

114

 

 

2.5

%

Other expenses, net (4)

 

2,426

 

 

 

3,251

 

 

 

(825

)

 

(25.4

)%

Tax effect of adjustments (5)

 

(2,841

)

 

 

(2,901

)

 

 

60

 

 

2.1

%

Adjusted net income

 

19,505

 

 

 

21,064

 

 

 

(1,559

)

 

(7.4

)%

Depreciation and amortization of property and equipment

 

10,434

 

 

 

9,063

 

 

 

1,371

 

 

15.1

%

Interest expense, net

 

8,660

 

 

 

7,888

 

 

 

772

 

 

9.8

%

Emerging markets (6)

 

40

 

 

 

(798

)

 

 

838

 

 

105.0

%

Income tax expense

 

7,608

 

 

 

8,901

 

 

 

(1,293

)

 

(14.5

)%

Adjusted EBITDA

$

46,247

 

 

$

46,118

 

 

$

129

 

 

0.3

%

(1)

 

Amortization of intangible assets and route and customer acquisition costs consist of upfront cash payments and future cash payments to third-party sales agents to acquire the location partners that are not connected with a business acquisition, as well as the amortization of other intangible assets. We amortize the upfront cash payment over the life of the contract, including expected renewals, beginning on the date the location goes live, and recognize 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 the established practice of providing higher upfront payments, and are also capitalized and amortized over the remaining life of the contract. Future cash payments do not include cash costs associated with renewing customer contracts as we do not generally incur significant costs as a result of extension or renewal of an existing contract. Location contracts acquired in a business combination are recorded at fair value as part of the business combination accounting and then amortized as an intangible asset on a straight-line basis over the expected useful life of the contract of 15 years. “Amortization of intangible assets and route and customer acquisition costs” aggregates the non-cash amortization charges relating to upfront route and customer acquisition cost payments and location contracts acquired, as well as the amortization of other intangible assets.

(2)

 

Stock-based compensation consists of options, restricted stock units, and performance-based restricted stock units.

(3)

 

Loss on change in fair value of contingent earnout shares represents a non-cash fair value adjustment at each reporting period end related to the value of these contingent shares. Upon achieving such contingency, shares of Class A-2 common stock convert to Class A-1 common stock resulting in a non-cash settlement of the obligation.

(4)

 

Other expenses, net consists of (i) non-cash expenses including the remeasurement of contingent consideration liabilities, (ii) non-recurring lobbying and legal expenses related to distributed gaming expansion in current or prospective markets, and (iii) other non-recurring expenses.

(5)

 

Calculated by excluding the impact of the non-GAAP adjustments from the current period tax provision calculations.

(6)

 

Emerging markets consist of the results, on an Adjusted EBITDA basis, for non-core jurisdictions where our operations are developing. Markets are no longer considered emerging when we have installed or acquired at least 500 gaming terminals in the jurisdiction, or when 24 months have elapsed from the date we first install or acquire gaming terminals in the jurisdiction, whichever occurs first. We currently view Pennsylvania as an emerging market. Prior to January 2024, Iowa was considered an emerging market. Prior to April 2023, Nebraska was considered an emerging market.

Reconciliation of Debt to Net Debt

 

As of March 31,

(in thousands)

 

2024

 

 

 

2023

 

Debt, net of current maturities

$

511,425

 

 

$

514,146

 

Plus: Current maturities of debt

 

28,485

 

 

 

23,469

 

Less: Cash and cash equivalents

 

(253,919

)

 

 

(228,529

)

Net debt

$

285,991

 

 

$

309,086

 

Conference Call

Accel will host an investor conference call on May 8, 2024 at 4:30 p.m. Central time (5:30 p.m. Eastern time) to discuss these financial and operating results. Interested parties may join the live webcast by registering at https://www.netroadshow.com/events/login?show=029ad323&confId=63414 or accessing the webcast via the company’s investor relations website: ir.accelentertainment.com. Following completion of the call, a replay of the webcast will be posted on Accel’s investor relations website.

About Accel

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

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, contained in this press release are forward-looking statements, including, but not limited to, any statements regarding our estimates of number of gaming terminals, locations, revenues, Adjusted EBITDA and capital expenditures. The words “predict,” “estimated,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” “continue,” and similar expressions or the negatives thereof are intended to identify forward-looking statements. These forward-looking statements represent our current reasonable expectations and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors including, but not limited to: Accel’s ability to operate in existing markets or expand into new jurisdictions; Accel’s ability to offer new and innovative products and services that fulfill the needs of location partners and create strong and sustained player appeal; Accel’s dependence on relationships with key manufacturers, developers and third parties to obtain gaming terminals, amusement machines, and related supplies, programs, and technologies for its business on acceptable terms; the negative impact on Accel’s future results of operations by the slow growth in demand for gaming terminals and by the slow growth of new gaming jurisdictions; Accel’s heavy dependency on its ability to win, maintain and renew contracts with location partners; unfavorable macroeconomic conditions or decreased discretionary spending due to other factors such as interest rate volatility, persistent inflation, actual or perceived instability in the U.S. and global banking systems, high fuel rates, recessions, epidemics or other public health issues, terrorist activity or threat thereof, civil unrest or other macroeconomic or political uncertainties, that could adversely affect Accel’s business, results of operations, cash flows and financial conditions and other risks and uncertainties indicated from time to time in documents filed or to be filed with the Securities and Exchange Commission (“SEC”).

Accordingly, forward-looking statements, including any projections or analysis, should not be viewed as factual and should not be relied upon as an accurate prediction of future results. The forward-looking statements contained in this press release are based on our current expectations and beliefs concerning future developments and their potential effects on Accel. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section entitled “Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended December 31,2023 filed by Accel with the SEC on February 28, 2024 (the "Form 10-K"), 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 Form 10-K, as well as Accel’s other filings with the SEC. These and other factors could cause our results to differ materially from those expressed in this press release.

Non-GAAP Financial Information

This press release includes certain financial information not prepared in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”), including Adjusted EBITDA, Adjusted net income, and Net Debt. Adjusted EBITDA, Adjusted net income, and Net Debt are non-GAAP financial measures and are key metrics used to monitor ongoing core operations. Management of Accel believes Adjusted EBITDA, Adjusted net income, and Net Debt enhance the understanding of Accel’s underlying drivers of profitability and trends in Accel’s business and facilitates company-to-company and period-to-period comparisons, because these non-GAAP financial measures exclude the effects of certain non-cash items, represents certain nonrecurring items that are unrelated to core performance, or excludes non-core operations. Management of Accel also believes that these non-GAAP financial measures are used by investors, analysts and other interested parties as measures of financial performance.

Adjusted EBITDA, Adjusted net income, and Net Debt

Although Accel excludes amortization of intangible assets and route and customer acquisition costs from Adjusted EBITDA and Adjusted net income, Accel believes that it is important for investors to understand that these route, customer and other intangible assets contribute to revenue generation. Any future acquisitions may result in amortization of intangible assets and route and customer acquisition costs.

Adjusted EBITDA, Adjusted net income, and Net Debt are not recognized terms under GAAP. These non-GAAP financial measures exclude some, but not all, items that affect net income, and these measures may vary among companies. These non-GAAP financial measures are unaudited and have important limitations as an analytical tool, should not be viewed in isolation and do not purport to be alternatives to net income as indicators of operating performance.

ACCEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

March 31,

 

2024

 

2023

Net revenues:

 

 

 

Net gaming

$

288,137

 

$

279,380

Amusement

 

6,129

 

 

6,798

Manufacturing

 

2,209

 

 

2,122

ATM fees and other

 

5,342

 

 

4,908

Total net revenues

 

301,817

 

 

293,208

Operating expenses:

 

 

 

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

 

209,167

 

 

203,554

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

 

1,159

 

 

1,408

General and administrative

 

47,634

 

 

43,018

Depreciation and amortization of property and equipment

 

10,434

 

 

9,063

Amortization of intangible assets and route and customer acquisition costs

 

5,438

 

 

5,242

Other expenses, net

 

2,426

 

 

3,251

Total operating expenses

 

276,258

 

 

265,536

Operating income

 

25,559

 

 

27,672

Interest expense, net

 

8,660

 

 

7,888

Loss on change in fair value of contingent earnout shares

 

4,716

 

 

4,602

Income before income tax expense

 

12,183

 

 

15,182

Income tax expense

 

4,767

 

 

6,000

Net income

$

7,416

 

$

9,182

Earnings per common share:

 

 

 

Basic

$

0.09

 

$

0.11

Diluted

 

0.09

 

 

0.11

Weighted average number of common shares outstanding:

 

 

 

Basic

 

84,298

 

 

86,885

Diluted

 

85,300

 

 

87,132

 

 

 

 

ACCEL ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

March 31,

 

December 31,

 

2024

 

2023

Assets

(Unaudited)

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

253,919

 

 

$

261,611

 

Accounts receivable, net

 

13,737

 

 

 

13,467

 

Prepaid expenses

 

8,092

 

 

 

6,287

 

Inventories

 

7,841

 

 

 

7,681

 

Interest rate caplets

 

8,912

 

 

 

8,140

 

Other current assets

 

16,763

 

 

 

15,408

 

Total current assets

 

309,264

 

 

 

312,594

 

Property and equipment, net

 

271,414

 

 

 

260,813

 

Noncurrent assets:

 

 

 

Route and customer acquisition costs, net

 

20,458

 

 

 

19,188

 

Location contracts acquired, net

 

173,206

 

 

 

176,311

 

Goodwill

 

101,554

 

 

 

101,554

 

Other intangible assets, net

 

19,933

 

 

 

20,542

 

Interest rate caplets, net of current

 

5,342

 

 

 

4,871

 

Other assets

 

17,956

 

 

 

17,020

 

Total noncurrent assets

 

338,449

 

 

 

339,486

 

Total assets

$

919,127

 

 

$

912,893

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Current maturities of debt

$

28,485

 

 

$

28,483

 

Current portion of route and customer acquisition costs payable

 

1,480

 

 

 

1,505

 

Accrued location gaming expense

 

9,352

 

 

 

9,350

 

Accrued state gaming expense

 

19,076

 

 

 

18,364

 

Accounts payable and other accrued expenses

 

39,046

 

 

 

36,012

 

Accrued compensation and related expenses

 

8,900

 

 

 

12,648

 

Current portion of consideration payable

 

2,791

 

 

 

3,288

 

Total current liabilities

 

109,130

 

 

 

109,650

 

Long-term liabilities:

 

 

 

Debt, net of current maturities

 

511,425

 

 

 

514,091

 

Route and customer acquisition costs payable, less current portion

 

4,702

 

 

 

4,955

 

Consideration payable, less current portion

 

4,252

 

 

 

4,201

 

Contingent earnout share liability

 

36,544

 

 

 

31,827

 

Other long-term liabilities

 

7,144

 

 

 

7,015

 

Deferred income tax liability, net

 

43,801

 

 

 

42,750

 

Total long-term liabilities

 

607,868

 

 

 

604,839

 

Stockholders’ equity:

 

 

 

Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

Class A-1 Common Stock, par value $0.0001; 250,000,000 shares authorized; 95,266,660 shares issued and 83,778,268 shares outstanding at March 31, 2024; 95,016,960 shares issued and 84,123,385 shares outstanding at December 31, 2023

 

8

 

 

 

8

 

Additional paid-in capital

 

204,456

 

 

 

203,046

 

Treasury stock, at cost

 

(118,252

)

 

 

(112,070

)

Accumulated other comprehensive income

 

9,017

 

 

 

7,936

 

Accumulated earnings

 

106,900

 

 

 

99,484

 

Total stockholders' equity

 

202,129

 

 

 

198,404

 

Total liabilities and stockholders' equity

$

919,127

 

 

$

912,893

 

 

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