Document
false0001698991 0001698991 2020-09-21 2020-09-21
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 21, 2020
 
ACCEL ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
001-38136
98-1350261
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
 
140 Tower Drive
 
Burr Ridge
,
Illinois
60527
(Address of principal executive offices)
(Zip Code)

(630) 972-2235
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Class A-1 common stock, par value $0.0001 per share
ACEL
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 8.01. Other Events.
On September 21, 2020, Accel Entertainment, Inc. (the “Company”), issued a press release announcing that it has commenced an underwritten public offering of 12,000,000 shares of its Class A-1 Common Stock, consisting of 8,000,000 shares offered by the Company and 4,000,000 shares offered by certain selling stockholders of the Company. The Company intends to grant the underwriters a 30-day option to purchase up to an additional 320,237 shares of Class A-1 Common Stock and the selling stockholders intend to grant the underwriters a 30-day option to purchase up to an additional 1,479,763 shares of Class A-1 Common Stock.
A copy of the Company’s press release relating to this announcement is being furnished as Exhibit 99.1 to this Form 8-K.
In addition, the Company is supplementing its description of “Business” previously disclosed in Part I, Item 1 of its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as such discussion may be updated from time to time in subsequent filings made with the Securities and Exchange Commission (the “SEC”), to include the following information:
DraftKings Partnership
On September 9, 2020, the Company announced that it has entered into an exclusive agreement with DraftKings Inc. (Nasdaq: DKNG) (“DraftKings”), a leader in the digital sports entertainment and gaming industries. Effective as of September 9, 2020, the Company’s more than 2,350 video gaming locations across the entire State of Illinois will promote exclusive DraftKings content and programming across all Accel marketing channels, including the Company’s in-location digital display screens, to drive awareness of and retention for sports betting among its loyal player base.
Impact of COVID-19
On July 1, 2020, video gaming resumed in Illinois after the Illinois Gaming Board (“IGB”) made the decision to shut down all video gaming terminals (“VGTs”) across the State of Illinois starting at 9:00 p.m. on March 16, 2020 in response to the COVID-19 outbreak. By the third day of the relaunch, more than 90% of Accel’s locations were live and less than 3% of Accel’s VGTs were inoperative due to resumption protocols.
The shut down that began March 16, 2020 ultimately extended through June 30, 2020. The temporary shutdown of Illinois video gaming impacted all of the gaming days during the three months ended June 30, 2020 and 106 of the 182 gaming days (or 58% of gaming days) during the six months ended June 30, 2020. In light of these events and their effect on the Company’s employees and licensed establishment partners, the Company took action to position the Company to help mitigate the effects of the temporary cessation of operations and to preserve future operating flexibility by, among other things, furloughing approximately 90% of its employees and deferring certain payments to major vendors. Additionally, members of the Company’s senior management decided to voluntarily forgo their base salaries until the resumption of video gaming operations. Beginning in early June, the Company started reinstating employees from furlough in anticipation of resuming operations on July 1, 2020.
As a result of these developments, the Company’s revenues, results of operations, Adjusted EBITDA and cash flows have been materially affected, and the Company expects it to continue for at least as long as COVID-19 is a threat to the public health.
While the IGB has permitted the resumption of all video gaming activities since July 1, 2020 it is possible that it or the State of Illinois may order a shutdown by region (currently 11 regions), or a complete suspension of video gaming in the state, or institute stay-at-home, closure or other similar orders or measures in the future in response to a resurgence of COVID-19 or other events. The situation is rapidly changing and additional impacts to the business may arise that the Company is not aware of currently.
Preliminary Operating Trends
Based on data that is currently available, the following information reflects preliminary operating trends for July and August 2020 compared to the same period in 2019. However, these trends are preliminary estimates only, based solely on currently available information and the limited period that the properties were open in July and August 2020, and we caution you that these trends may not continue and that these trends may not recur at our other locations as they reopen, including as a result of varying levels of restrictions on operations imposed by the IGB or otherwise, customer response and demand, the potential for authorities reimposing restrictions in response to

2

continued developments with the COVID-19 pandemic and other events that could require new closures or delayed reopenings of Accel’s locations and the other factors described in Accel’s filings with the SEC.
Accel does not intend to update interim results for the reopened locations. In addition, the results are preliminary, based on management estimates, have not been reviewed by Accel’s auditors, or any other independent accounting firm, and are subject to change. Accel has not yet closed the financial records for the quarter and, as a result, the figures below may not be indicative of final results for these periods in July or August or indicative of the full quarter. As a result, the discussion below constitutes forward-looking statements and, therefore, we caution you that these statements are subject to risks and uncertainties, including possible adjustments and the risk factors highlighted in Accel’s filings with the SEC.
•
Total net revenues were approximately $89.0 million combined for July and August of 2020 as compared to $66.8 million combined for the comparable periods in 2019 and as compared to $81.0 million combined for January and February of 2020; and
•
Due to additional expenses to operate responsibly during COVID-19, margins in July and August combined decreased approximately 20 basis points for net (loss) income and 80 basis points for Adjusted EBITDA compared to the prior year period.
Adjusted EBITDA, is a non-GAAP financial measure and is defined as net (loss) income plus amortization of route and customer acquisition costs and location contracts acquired; stock-based compensation expense; other expenses, net; tax effect of adjustments; depreciation and amortization of property and equipment; interest expense; and provision for income taxes. For additional information regarding Adjusted EBITDA for historical periods and how management uses Adjusted EBITDA to evaluate operating performance, see Accel’s filings with the SEC.
In the third quarter of 2020, the Company filed its federal and state income tax returns and identified certain favorable return-to-provision adjustments following engagement of specialized tax technical expertise resulting in a change in estimate relative to the Company’s best estimate used in preparation of the 2019 income tax provision. The Company plans to record this change in estimate and related income tax benefit of approximately $7 million in the third quarter of 2020.
In addition, the Company is updating “-Business-Accel’s Core Strengths” to include the following:
Expand operations to other states. Various states and other jurisdictions have proposed legislation permitting VGTs or other forms of gaming in the past. These states include Indiana, Missouri and Mississippi. Accel may also choose to expand operations through strategic acquisitions or otherwise in other, more mature gaming jurisdictions where VGTs are currently legal, such as Virginia, Louisiana, Montana, Nevada, Oregon, South Dakota and West Virginia. Accel may attempt to seek approval to operate in additional jurisdictions that authorize video gaming. Accel believes it would be a favored entrant into any such markets given its track record of success and compliance. Accel believes its market opportunity measured by gross revenue could grow by 2025 to approximately $3 billion in Illinois, assuming further penetration in existing cities, legalization of opt-our municipalities such as Chicago and growth rates of its business consistent with historical trends. Accel further believes its market opportunity to be approximately $10 billion including those other states where VGTs are currently legal, approximately $20 billion in other states where commercial and tribal casinos are legal assuming adoption of VGT gaming at 20% of current casino revenues in those states, and $30 billion across the United States including new product lines such as sports betting.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number
 
Description
 
 
 
99.1
 



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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
ACCEL ENTERTAINMENT, INC.
 
 
 
 
Date: September 21, 2020
By:
 
/s/ Derek Harmer
 
 
 
Derek Harmer
 
 
 
General Counsel, Chief Compliance Officer and Secretary

 


4
 Exhibit


Accel Entertainment, Inc. Announces Proposed Public Offering of Class A-1 Common Stock

CHICAGO - September 21, 2020 - Accel Entertainment, Inc. (NYSE: ACEL) (the “Company”) announced today that it has commenced an underwritten public offering of 12,000,000 shares of its Class A-1 Common Stock, consisting of 8,000,000 shares offered by the Company and 4,000,000 shares offered by certain selling stockholders of the Company. The Company intends to grant the underwriters a 30-day option to purchase up to an additional 320,237 shares of Class A-1 Common Stock and the selling stockholders intend to grant the underwriters a 30-day option to purchase up to an additional 1,479,763 shares of Class A-1 Common Stock. Accel will not receive any proceeds from the sale of Class A-1 Common Stock offered by the selling stockholders. The offering is subject to market and other conditions, and there can be no assurance as to whether or when the offering may be completed.

Accel intends to use the net proceeds it receives from the offering for general corporate purposes.

Goldman Sachs & Co. LLC and J.P. Morgan are acting as joint book-running managers and as representatives of the underwriters for the offering and Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. are acting as joint book-running managers for the offering.

The offering will be made only by means of a prospectus. A preliminary prospectus related to the offering has been filed with the Securities and Exchange Commission (the “SEC”) and is available on the SEC’s website at http://www.sec.gov. Copies of the preliminary prospectus may also be obtained by contacting either of the following underwriters: Goldman Sachs & Co. LLC, Attention: Prospectus Department, 200 West Street, New York, New York 10282, by phone at (866) 471‐2526 or by email at prospectus-ny@ny.email.gs.com; or J.P. Morgan Securities LLC, c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, by telephone at (866) 803-9204 or by email at prospectus-eq_fi@jpmchase.com.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction to any person to whom it is unlawful to make an offer, solicitation or sale in such jurisdiction. The offering will be made under a combined prospectus filed as part of a registration statement on Form S-1 (the “Registration Statement”), which has been filed with the SEC but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective.

About the Company
Accel is a 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 may include “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 included in this press release are forward-looking statements. When used in this press release, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “target,” “plan,” “outlook” and similar expressions, as they relate to us or our




management team, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in the Company’s filings with the Securities and Exchange Commission (“SEC”). All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company. The Company undertakes no obligation to update these statements for revisions or changes after the date of this release, except as required by law. The Company cautions you that these forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in the Company’s Registration Statement on Form S-1, filed September 21, 2020 which is available publicly on the SEC’s website at www.sec.gov.

Media:
Eric Bonach
Abernathy MacGregor
212-371-5999
ejb@abmac.com