Accel Entertainment Inc

Previous wording

Manufacturing. Manufacturing revenue represents sales of gaming terminals and related equipment.

Current wording

Manufacturing. Manufacturing revenue represents sales of gaming terminals and software as well as other ancillary equipment.

Previous wording

Cost of manufacturing goods sold. Cost of manufacturing goods sold consists of costs associated with the sale of gaming terminals and related equipment.

Current wording

Cost of manufacturing goods sold. Cost of manufacturing goods sold consists of costs associated with the sale of gaming terminals and software as well as other ancillary equipment.

Previous wording

Total net revenues for the six months ended June 30, 2024 were $611.2 million, an increase of $25.4 million, or 4.3%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $24.4 million, which reflected an increase in gaming locations and terminals. Net revenues by state are presented below (in thousands):

Current wording

Total net revenues for the three months ended September 30, 2024 were $302.2 million, an increase of $14.7 million, or 5.1%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $15.8 million, which reflected an increase in gaming locations and terminals. Manufacturing revenue was $1.7 million, a decrease of $1.6 million, or 48.9%, compared to the prior-year period due to lower equipment sales. Net revenues by state are presented below (in thousands):

Previous wording

Cost of revenue for the three months ended June 30, 2024 was $213.3 million, an increase of $11.0 million, or 5.4%, compared to the prior-year period, driven by higher net gaming revenue, as described above.

Current wording

Cost of revenue for the three months ended September 30, 2024 was $210.8 million, an increase of $12.1 million, or 6.1%, compared to the prior-year period, driven by higher net gaming revenue, as described above.

Previous wording

General and administrative expenses for the six months ended June 30, 2024 were $94.2 million, an increase of $6.9 million, or 8.0%, compared to the prior-year period. The increase was attributable to higher payroll-related costs, as we continue to grow our operations, as well as higher stock-based compensation expense, partially offset by lower legal settlements.

Current wording

General and administrative expenses for the three months ended September 30, 2024 were $47.9 million, an increase of $2.7 million, or 6.1%, compared to the prior-year period. The increase was attributable to higher payroll-related costs, as we continue to grow our operations, as well as higher stock-based compensation expense, partially offset by lower parts and repair expense.

Previous wording

Depreciation and amortization of property and equipment for the three months ended June 30, 2024 was $10.8 million, an increase of $1.3 million, or 14.3%, compared to the prior-year period due to an increased number of gaming terminals.

Current wording

Depreciation and amortization of property and equipment for the three months ended September 30, 2024 was $11.0 million, an increase of $1.6 million, or 17.0%, compared to the prior-year period due to an increased number of gaming terminals.

Previous wording

Amortization of intangible assets and route and customer acquisition costs for the three months ended June 30, 2024 were $5.6 million, an increase of $0.3 million, or 5.8%, compared to the prior-year period.

Current wording

Amortization of intangible assets and route and customer acquisition costs for the three months ended September 30, 2024 were $5.8 million, an increase of $0.5 million, or 9.1%, compared to the prior-year period.

Previous wording

Other expenses, net for the three months ended June 30, 2024 were $7.3 million, compared to $0.1 million in the prior-year period. The increase was primarily attributable to higher fair value adjustments associated with the revaluation of contingent consideration liabilities and non-recurring expenses, as well as the impact of a $1.7 million gain recognized in the prior-year period on the convertible note settlement as discussed in Note 4 to the condensed consolidated financial statements.

Current wording

Other expenses, net for the three months ended September 30, 2024 were $3.9 million, an increase of $2.2 million, or 129.9%, compared to the prior-year period. The increase was primarily attributable to higher fair value adjustments associated with the revaluation of contingent consideration liabilities and higher non-recurring expenses related to acquisitions.

Previous wording

Interest expense, net for the six months ended June 30, 2024 was $17.6 million, an increase of $1.4 million, or 8.9%, compared to the prior-year period primarily due to an increase in average outstanding debt and higher interest rates, partially offset by the benefit realized on our interest rate caplets. For the six months ended June 30, 2024, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 7.7% compared to a rate of approximately 7.0% for the prior-year period.

Current wording

Interest expense, net for the three months ended September 30, 2024 was $9.2 million, an increase of $0.7 million, or 8.9%, compared to the prior-year period primarily due to an increase in average outstanding debt, partially offset by the benefit realized on our interest rate caplets. For the three months ended September 30, 2024, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 7.6% for both periods.

Previous wording

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

Current wording

Loss on change in fair value of contingent earnout shares

Previous wording

The change in the fair value of contingent earnout shares for the three months ended June 30, 2024 was a gain of $4.7 million, compared to a loss of $4.8 million the prior-year period. The change was primarily due to the change in the market value of our Class A-1 common stock, which is the primary input to the valuation of the contingent earnout shares.

Current wording

The change in the fair value of contingent earnout shares for the three months ended September 30, 2024 was a loss of $4.2 million, compared to a loss of $1.6 million the prior-year period. The change was primarily due to the change in the market value of our Class A-1 common stock, which is the primary input to the valuation of the contingent earnout shares.

Previous wording

Income tax expense for the three months ended June 30, 2024 was $3.9 million, a decrease of $2.2 million, or 35.5%, compared to the prior-year period. The effective tax rate for the three months ended June 30, 2024 was 21.2% compared to 37.9% in the prior-year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.

Current wording

Income tax expense for the three months ended September 30, 2024 was $3.6 million, a decrease of $1.1 million, or 22.9%, compared to the prior-year period. The effective tax rate for the three months ended September 30, 2024 was 42.2% compared to 30.7% in the prior-year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.

Previous wording

The following table summarizes our results of operations on a consolidated basis for thesix months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our results of operations on a consolidated basis for thenine months ended September 30, 2024 and 2023:

Previous wording

Total net revenues for the three months ended June 30, 2024 were $309.4 million, an increase of $16.8 million, or 5.7%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $15.7 million, which reflected an increase in gaming locations and terminals. Net revenues by state are presented below (in thousands):

Current wording

Total net revenues for the nine months ended September 30, 2024 were $913.5 million, an increase of $40.1 million, or 4.6%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $40.2 million, which reflected an increase in gaming locations and terminals. Net revenues by state are presented below (in thousands):

Previous wording

Cost of revenue for the six months ended June 30, 2024 was $422.5 million, an increase of $16.6 million, or 4.1%, compared to the prior-year period, driven by higher net gaming revenue, as described above.

Current wording

Cost of revenue for the nine months ended September 30, 2024 was $633.3 million, an increase of $28.7 million, or 4.8%, compared to the prior-year period, driven by higher net gaming revenue, as described above.

Previous wording

Cost of manufacturing goods sold for the three months ended June 30, 2024 was $3.2 million, an increase of $1.0 million, or 46.8%, compared to the prior-year period due to higher costs associated with content licensing fees on software sales.

Current wording

Cost of manufacturing goods sold for the nine months ended September 30, 2024 was $5.3 million, a decrease of $0.3 million, or 6.1%, compared to the prior-year period primarily due to lower manufacturing revenue.

Previous wording

General and administrative expenses for the three months ended June 30, 2024 were $46.5 million, an increase of $2.3 million, or 5.2%, compared to the prior-year period. The increase was attributable to higher payroll-related costs, as we continue to grow our operations, as well as higher stock-based compensation expense, partially offset by lower legal settlements and parts and repair expense.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 were $142.1 million, an increase of $9.7 million, or 7.3%, compared to the prior-year period. The increase was attributable to higher payroll-related costs, as we continue to grow our operations, as well as higher stock-based compensation expense, partially offset by lower legal settlements and lower parts and repair expense.

Previous wording

Depreciation and amortization of property and equipment for the six months ended June 30, 2024 was $21.2 million, an increase of $2.7 million, or 14.7%, compared to the prior-year period due to an increased number of gaming terminals.

Current wording

Depreciation and amortization of property and equipment for the nine months ended September 30, 2024 was $32.2 million, an increase of $4.3 million, or 15.5%, compared to the prior-year period due to an increased number of gaming terminals.

Previous wording

Amortization of intangible assets and route and customer acquisition costs for the six months ended June 30, 2024 were $11.0 million, an increase of $0.5 million, or 4.8%, compared to the prior-year period.

Current wording

Amortization of intangible assets and route and customer acquisition costs for the nine months ended September 30, 2024 were $16.8 million, an increase of $1.0 million, or 6.2%, compared to the prior-year period.

Previous wording

Other expenses, net for the six months ended June 30, 2024 were $9.8 million, an increase of $6.4 million, or 193.4%, compared to the prior-year period. The increase was primarily attributable to higher fair value adjustments associated with the revaluation of contingent consideration liabilities and non-recurring expenses, as well as the impact of a $1.7 million gain recognized in the prior-year period on the convertible note settlement as discussed in Note 4 to the condensed consolidated financial statements.

Current wording

Other expenses, net for the nine months ended September 30, 2024 were $13.6 million, an increase of $8.6 million, or 172.1%, compared to the prior-year period. The increase was primarily attributable to higher fair value adjustments associated with the revaluation of contingent consideration liabilities and higher non-recurring expenses related to acquisitions, as well as the impact of a $1.7 million gain recognized in the prior-year period on the convertible note settlement as discussed in Note 4 to the condensed consolidated financial statements.

Previous wording

Interest expense, net for the three months ended June 30, 2024 was $8.9 million, an increase of $0.7 million, or 8.0%, compared to the prior-year period primarily due to an increase in average outstanding debt and higher interest rates, partially offset by the benefit realized on our interest rate caplets. For the three months ended June 30, 2024, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 7.7% compared to a rate of approximately 7.2% for the prior-year period.

Current wording

Interest expense, net for the nine months ended September 30, 2024 was $26.7 million, an increase of $2.2 million, or 8.9%, compared to the prior-year period primarily due to an increase in average outstanding debt and higher interest rates, partially offset by the benefit realized on our interest rate caplets. For the nine months ended September 30, 2024, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 7.6% compared to a rate of approximately 7.2% for the prior-year period.

Previous wording

The change in the fair value of contingent earnout shares for the six months ended June 30, 2024 was a gain of less than $0.1 million, compared to a loss of $9.4 million the prior-year period. The change was primarily due to the change in the market value of our Class A-1 common stock, which is the primary input to the valuation of the contingent earnout shares.

Current wording

The change in the fair value of contingent earnout shares for the nine months ended September 30, 2024 was a loss of $4.2 million, compared to a loss of $11.1 million the prior-year period. The change was primarily due to the change in the market value of our Class A-1 common stock, which is the primary input to the valuation of the contingent earnout shares.

Previous wording

Income tax expense for the six months ended June 30, 2024 was $8.7 million, a decrease of $3.4 million, or 28.1%, compared to the prior-year period. The effective tax rate for the six months ended June 30, 2024 was 28.3% compared to 38.7% in the prior-year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.

Current wording

Income tax expense for the nine months ended September 30, 2024 was $12.3 million, a decrease of $4.5 million, or 26.7%, compared to the prior-year period. The effective tax rate for the nine months ended September 30, 2024 was 31.3% compared to 36.1% in the prior-year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.

Previous wording

The following table sets forth information with respect to our location hold-per-day in our primary locations for the three and six months ended:

Current wording

The following tables set forth information with respect to our location hold-per-day in our primary locations for the three and nine months ended:

Previous wording

Adjusted EBITDA for the three months ended June 30, 2024, was$49.7 million, an increase of $3.1 million, or 6.5%, compared to the prior-year period. Adjusted EBITDA for the six months ended June 30, 2024, was$95.9 million, an increase of $3.2 million, or 3.4%, compared to the prior-year period. The increase for both periods was attributable to an increase in the number of locations and gaming terminals.

Current wording

Adjusted EBITDA for the three months ended September 30, 2024, was$45.9 million, an increase of $1.7 million, or 3.9%, compared to the prior-year period. Adjusted EBITDA for thenine months ended September 30, 2024, was$141.8 million, an increase of $4.9 million, or 3.6%, compared to the prior-year period. The increase for both periods was attributable to an increase in the number of locations and gaming terminals.

Previous wording

We believe that our cash and cash equivalents, cash flows from operations and borrowing availability under the Credit Agreement (as defined below) will be sufficient to meet our capital requirements for the next twelve months. Our primary short-term cash needs are paying operating expenses and contingent earnout payments, purchases of property and equipment, servicing outstanding indebtedness, and funding our Board of Directors approved share repurchase program and near term acquisitions. As of June 30, 2024, we had $254.9 million in cash and cash equivalents.

Current wording

We believe that our cash and cash equivalents, cash flows from operations and borrowing availability under the Credit Agreement (as defined below) will be sufficient to meet our capital requirements for the next twelve months. Our primary short-term cash needs are paying operating expenses and contingent earnout payments, purchases of property and equipment, servicing outstanding indebtedness, and funding our Board of Directors approved share repurchase program and near-term acquisitions. As of September 30, 2024, we had $265.1 million in cash and cash equivalents.

Previous wording

•$150.0 million revolving credit facility, including a letter of credit facility with a $10.0 million sublimit and a swing line facility with a $10.0 million sublimit,

Current wording

•$150.0 million revolving credit facility, including a letter of credit facility with a $10.0 million sublimit and a swingline facility with a $10.0 million sublimit,

Previous wording

•a $400.0 million delayed draw term loan facility, which is available for borrowing until October 22, 2024.

Current wording

•a $400.0 million delayed draw term loan facility(“DDTL”)

Previous wording

As of June 30, 2024, there remained $267 million of availability under the Credit Agreement and the weighted-average interest rate on our borrowings under the Credit Agreement was approximately 7.7%.

Current wording

As of September 30, 2024, there remained $273 million of availability under the Credit Agreement and the weighted-average interest rate on our borrowings under the Credit Agreement was approximately 7.6%.

Previous wording

We recognized anunrealized loss, net of taxes, on the change in fair value of the caplets of$1.1 million and an unrealized gain of less than $0.1 million for the three and six months ended June 30, 2024, respectively. In comparison, we recognized an unrealized gain of$2.1 million and an unrealized loss of$0.1 million, net of taxes, for the three and six months ended June 30, 2023, respectively. We also recognized interest income on the caplets of$2.5 million and$5.1 million for thethree and six months ended June 30, 2024. In comparison, we recognized interest income on the caplets of$2.3 million and$4.2 million for the three and six months ended June 30, 2023, respectively. These amounts are reflected in interest expense, netin the condensed consolidated statements of operations and other comprehensive income.

Current wording

We recognized anunrealized loss, net of taxes, on the change in fair value of the caplets of$4.1 million for both the three and nine months ended September 30, 2024. In comparison, we recognized an unrealized gain of$0.1 million and an unrealized loss of less than$0.1 million, net of taxes, for the three and nine months ended September 30, 2023, respectively. We also recognized interest income on the caplets of$2.6 million and$7.7 million for thethree and nine months ended September 30, 2024, respectively. In comparison, we recognized interest income on the caplets of$2.5 million and$6.7 million for the three and nine months ended September 30, 2023, respectively. These amounts are reflected in interest expense, netin the condensed consolidated statements of operations and other comprehensive income.

Previous wording

For the six months ended June 30, 2024, net cash provided by operating activities was $57.6 million, a decrease of $6.2 million compared to the prior-year period due primarily to lower deferred income taxes and lower working capital adjustments, partially offset by higher remeasurements on contingent consideration.

Current wording

For the nine months ended September 30, 2024, net cash provided by operating activities was $107.7 million, an increase in cash of $15.7 million compared to the prior-year period due primarily to higher working capital adjustments and higher remeasurements on contingent consideration, partially offset by lower deferred income taxes.

Previous wording

For the six months ended June 30, 2024, net cash used in investing activities was $69.3 million, an increase in cash used of $53.1 million compared to the prior-year period. The increase in cash used was primarily attributable to more cash used for business and asset acquisitions, deposits paid against a portion of the purchase price on a pending business acquisition as well as an investment in an equity interest, partially offset by the proceeds from the settlement of the convertible notes in the prior year and lower purchases of property and equipment. We anticipate our capital expenditures will be approximately $55–65 million in 2024.

Current wording

For the nine months ended September 30, 2024, net cash used in investing activities was $90.2 million, a decrease in cash of $54.8 million compared to the prior-year period. The decrease in cash was primarily attributable to the proceeds from the settlement of the convertible notes in the prior year as well as more cash used for business and asset acquisitions, higher deposits paid against a portion of the purchase price on a pending business acquisition and an investment in an equity interest, partially offset by lower purchases of property and equipment. We anticipate our capital expenditures will be approximately $60–65 million in 2024.

Previous wording

Net cash provided by (used in) financing activities

Current wording

Net cash used in financing activities

Previous wording

For the six months ended June 30, 2024, net cash provided by financing activities was $5.0 million, compared to cash used in financing activities of $38.3 million in the prior-year period. The change reflects an increase in cash due to higher borrowings, partially offset by higher stock repurchases.

Current wording

For the nine months ended September 30, 2024, net cash used in financing activities was $14.0 million, an increase in cash of $36.4 million compared to the prior-year period. The change reflects higher net borrowings on our debt, partially offset by higher stock repurchases.