Accel Entertainment Announces Q2 2024 Operating Results

July 30, 2024 04:10 PM Eastern Daylight Time

CHICAGO--(BUSINESS WIRE)--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	10	1.6	%
Nevada	359	355	4	1.1	%
Nebraska	239	197	42	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	$	4		0.5	%
Montana		612		569		43		7.6	%
Nevada		843		860		(17	)	(2.0	)%
Nebraska		255		237		18		7.6	%

	Six Months Ended June 30,				Increase / (Decrease)
	2024		2023		Change ($)			Change (%)
Illinois	$	861	$	871	$	(10	)	(1.1	)%
Montana		601		573		28		4.9	%
Nevada		845		860		(15	)	(1.7	)%
Nebraska		243		229		14		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			73			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		38			78			78			(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			73		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		8			8
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		121,486			99,484
Total stockholders' equity		209,088			198,404
Total liabilities and stockholders' equity	$	950,348		$	912,893

Contacts

Media:
Eric Bonach
H/Advisors Abernathy
212-371-5999
eric.bonach@h-advisors.global

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