Accel Entertainment Announces Q2 2024 Operating Results

Accel Entertainment, Inc. (NYSE: ACEL) today announced certain financial and operating results for the second quarter ended June 30, 2024.

Highlights:

Ended Q2 2024 with 4,034 locations; an increase of 4.7% compared to Q2 2023
Ended Q2 2024 with 25,757 gaming terminals; an increase of 5.7% compared to Q2 2023
Record revenues of $309.4 million for Q2 2024; an increase of 5.7% compared to Q2 2023
Net income of $14.6 million for Q2 2024; an increase of 46.1% compared to Q2 2023
Record Adjusted EBITDA of $49.7 million for Q2 2024; an increase of 6.5% compared to Q2 2023
Q2 2024 ended with $311 million of net debt; an increase of 9% compared to Q2 2023
Repurchased approximately $9.2 million of Accel Class A-1 common stock in Q2 2024
Announced acquisition of Fairmount Holdings, the owner of the FanDuel Sportsbook & Horse Racing in Collinsville, Illinois, which is expected to close in Q4 2024

Accel CEO Andy Rubenstein commented, “I am happy to report that we delivered another record-setting quarter, continuing to demonstrate the strength of our local, convenience-based gaming model. We are excited to leverage our strengths in catering to local markets with our announcement to acquire the FanDuel Sportsbook & Horse Racing, a single-site, easily accessible, local gaming venue and a natural extension of our route-based gaming platform. As we continue to strengthen our core and expand our offerings, we believe we can continue to generate attractive low-teens returns on capital and improve our trading multiples, making Accel a compelling investment opportunity.”

Condensed Consolidated Statements of Operations and Other Data

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

2024

2023

2024

2023

Total net revenues

309,413

292,647

611,230

585,855

Operating income

22,683

29,164

48,242

56,836

Income before income tax expense

18,519

16,085

30,702

31,267

Net income

14,586

9,983

22,002

19,165

Other Financial Data:

Adjusted EBITDA(1)

49,665

46,612

95,912

92,730

Adjusted net income (2)

21,383

20,435

40,888

41,499

(1)

Adjusted EBITDA is a non-GAAP metric. See "Non-GAAP Financial Measures" for a reconciliation to GAAP.

(2)

Adjusted net income is a non-GAAP metric. See "Non-GAAP Financial Measures" for a reconciliation to GAAP.

Net Revenues

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Net revenues by state:

Illinois

227,093

215,947

451,956

435,790

Montana

42,583

39,275

80,724

75,726

Nevada

29,322

29,869

58,531

59,830

Nebraska

6,249

4,488

12,083

8,412

Other

4,166

3,068

7,936

6,097

Total net revenues

309,413

292,647

611,230

585,855

Key Business Metrics

Locations (1)

As of June 30,

Increase / (Decrease)

2024

2023

Change

Change (%)

Illinois

2,816

2,690

126

4.7

Montana

620

610

1.6

Nevada

359

355

1.1

Nebraska

239

197

21.3

Total locations

4,034

3,852

182

4.7

Gaming terminals (1)

As of June 30,

Increase / (Decrease)

2024

2023

Change

Change (%)

Illinois

15,743

14,767

976

6.6

Montana

6,435

6,210

225

3.6

Nevada

2,735

2,782

(47

)

(1.7

Nebraska

844

609

235

38.6

Total gaming terminals

25,757

24,368

1,389

5.7

Location hold-per-day (2)

Three Months Ended June 30,

Increase / (Decrease)

2024

2023

Change ($)

Change (%)

Illinois

862

858

0.5

Montana

612

569

7.6

Nevada

843

860

(17

)

(2.0

Nebraska

255

237

7.6

Six Months Ended June 30,

Increase / (Decrease)

2024

2023

Change ($)

Change (%)

Illinois

861

871

(10

)

(1.1

Montana

601

573

4.9

Nevada

845

860

(15

)

(1.7

Nebraska

243

229

6.1

(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. We 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

Six Months Ended June 30,

Increase / (Decrease)

(in thousands)

2024

2023

Change ($)

Change (%)

Net cash provided by operating activities

57,614

63,845

(6,231

)

(9.8

Net cash used in investing activities

(69,324

)

(16,245

)

(53,079

)

326.7

Net cash provided by (used in) financing activities

5,022

(38,279

)

43,301

113.1

Non-GAAP Financial Measures

Adjusted net income is defined as net income plus:

Amortization of intangible assets and route and customer acquisition costs
Stock-based compensation expense
(Gain) loss on change in fair value of contingent earnout shares
Other expenses, net which 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
Tax effect of adjustments

Adjusted EBITDA is defined as net income plus:

Amortization of intangible assets and route and customer acquisition costs
Stock-based compensation expense
(Gain) 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, which reflects 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
Income tax expense

Net debt is defined as debt, net of current maturities plus:

Current maturities of debt
less Cash and cash equivalents

Adjusted net income and Adjusted EBITDA

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

2024

2023

2024

2023

Net income

14,586

9,983

22,002

19,165

Adjustments:

Amortization of intangible assets and route and customer acquisition costs

5,589

5,284

11,027

10,526

Stock-based compensation expense

3,235

2,567

5,585

4,255

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

(4,742

)

4,836

(26

)

9,438

Other expenses, net

7,327

9,753

3,324

Tax effect of adjustments

(4,612

)

(2,308

)

(7,453

)

(5,209

)

Adjusted net income

21,383

20,435

40,888

41,499

Depreciation and amortization of property and equipment

10,794

9,446

21,228

18,509

Interest expense, net

8,906

8,243

17,566

16,131

Emerging markets

(720

)

Income tax expense

8,544

8,410

16,152

17,311

Adjusted EBITDA

49,665

46,612

95,912

92,730

Net Debt

As of June 30,

(in thousands)

2024

2023

Debt, net of current maturities

537,252

489,721

Plus: Current maturities of debt

28,489

28,472

Less: Cash and cash equivalents

(254,923

)

(233,434

)

Net debt

310,818

284,759

Conference Call

Accel will host an investor conference call on July 30, 2024 at 4:00 p.m. Central time (5:00 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=70f3f5e5&confId=66550 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, our ability to continue to generate returns on capital and improve our trading multiples, and our proposed acquisition of Fairmount Holdings, Inc. 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; the parties' ability to satisfy the conditions to the consummation of the proposed acquisition of Fairmount Holdings, Inc. and the risk that the proposed acquisition may not be completed in a timely manner or at all; 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.

ACCEL ENTERTAINMENT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2024

2023

2024

2023

Net revenues:

Net gaming

293,240

277,551

581,377

556,931

Amusement

5,539

5,630

11,668

12,428

Manufacturing

5,208

4,430

7,417

6,552

ATM fees and other

5,426

5,036

10,768

9,944

Total net revenues

309,413

292,647

611,230

585,855

Operating expenses:

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

213,317

202,306

422,484

405,860

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

3,162

2,154

4,321

3,562

General and administrative

46,541

44,220

94,175

87,238

Depreciation and amortization of property and equipment

10,794

9,446

21,228

18,509

Amortization of intangible assets and route and customer acquisition costs

5,589

5,284

11,027

10,526

Other expenses, net

7,327

9,753

3,324

Total operating expenses

286,730

263,483

562,988

529,019

Operating income

22,683

29,164

48,242

56,836

Interest expense, net

8,906

8,243

17,566

16,131

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

(4,742

)

4,836

(26

)

9,438

Income before income tax expense

18,519

16,085

30,702

31,267

Income tax expense

3,933

6,102

8,700

12,102

Net income

14,586

9,983

22,002

19,165

Earnings per common share:

Basic

0.17

0.12

0.26

0.22

Diluted

0.17

0.11

0.26

0.22

Weighted average number of common shares outstanding:

Basic

83,911

86,184

84,105

86,529

Diluted

85,054

86,820

85,178

86,971

ACCEL ENTERTAINMENT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

June 30,

December 31,

2024

2023

Assets

(Unaudited)

Current assets:

Cash and cash equivalents

254,923

261,611

Accounts receivable, net

15,149

13,467

Prepaid expenses

8,765

6,287

Inventories

7,533

7,681

Interest rate caplets

8,801

8,140

Other current assets

11,111

8,853

Total current assets

322,201

312,594

Property and equipment, net

276,477

260,813

Noncurrent assets:

Route and customer acquisition costs, net

23,705

19,188

Location contracts acquired, net

181,350

176,311

Goodwill

101,859

101,554

Other intangible assets, net

19,324

20,542

Interest rate caplets, net of current

3,730

4,871

Other assets

21,702

17,020

Total noncurrent assets

351,670

339,486

Total assets

950,348

912,893

Liabilities and Stockholders’ Equity

Current liabilities:

Current maturities of debt

28,489

28,483

Current portion of route and customer acquisition costs payable

2,014

1,505

Accrued location gaming expense

9,129

9,350

Accrued state gaming expense

17,177

18,364

Accounts payable and other accrued expenses

34,476

36,012

Accrued compensation and related expenses

11,195

12,648

Current portion of consideration payable

3,275

3,288

Total current liabilities

105,755

109,650

Long-term liabilities:

Debt, net of current maturities

537,252

514,091

Route and customer acquisition costs payable, less current portion

7,482

4,955

Consideration payable, less current portion

9,794

4,201

Contingent earnout share liability

31,801

31,827

Other long-term liabilities

6,713

7,015

Deferred income tax liability, net

42,463

42,750

Total long-term liabilities

635,505

604,839

Stockholders’ equity:

Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2024 and December 31, 2023

—

Class A-1 Common Stock, par value $0.0001; 250,000,000 shares authorized; 95,352,477 shares issued and 82,958,153 shares outstanding at June 30, 2024; 95,016,960 shares issued and 84,123,385 shares outstanding at December 31, 2023

Additional paid-in capital

207,199

203,046

Treasury stock, at cost

(127,545

)

(112,070

)

Accumulated other comprehensive income

7,940

7,936

Accumulated earnings