Accel Entertainment, Inc. · NYSE:ACEL
Accel Entertainment — SPAC Merger (September 2019)
54 slides from Accel Entertainment's SPAC merger presentation, Sep 9, 2019
Slide 1: Accel Entertainment – Research Analyst Day
September 2019 Accel Entertainment – Research Analyst Day Exhibit 99.1
Slide 2: Use of Projections
Use of Projections This presentation contains financial forecasts prepared by TPG Pace Holdings Corp. (“Pace”) with respect to certain financial metrics of Accel Entertainment, Inc. (“Accel”), including, but not limited to, revenues (gaming, other, and gross), gross profit, adjusted EBITDA, adjusted
Slide 3: Important Information (continued)
Important Information (continued) No Representations or Warranties This presentation does not purport to contain all of the information that may be required to evaluate a possible transaction. No representation or warranty, express or implied, is or will be given by Pace or Accel or any of their res
Slide 4: TPG Pace Holdings transaction with Accel Entertainment
TPG Pace Holdings Corp. (“Pace” or “TPGH”) a $460 million special purpose acquisition company (“SPAC”) has entered into a transaction agreement with the shareholders of Accel Entertainment, Inc. (“Accel”) On August 29, 2019, Accel announced that it entered into a definitive agreement to acquire Gran
Slide 5: Why Invest in Accel Entertainment?
Why Invest in Accel Entertainment? Delivering Industry Leading Growth Favorable tailwinds expect to continue with significant backlog of locations yet to go-live Unique Asset Light Business Model Contracted recurring revenues and best-in-class ROICs Multiple Ways to Create Value Organic expansion op
Slide 6: Record Q2 Results Validate Pace's Investment Thesis
Accel’s Record Q2 Results and Attractive Recent Add-On Transaction Validate Pace’s Investment Thesis Multiple Opportunities to Invest for Growth Attractive Fundamental Valuation Highly Visible EBITDA Growth Substantial FCF Generation from a Unique Asset-Light Model Strong Balance Sheet
Slide 7: Executive Relevant Experience
Executive Relevant Experience Andy Rubenstein President, CEO, & Director Chairman and CEO, responsible for overall business operations Prior to Accel, Andy was the owner and operator of the largest liquor store chain in central Illinois by revenue after starting his career at Arthur Andersen Consult
Slide 8: Key Business Model Attributes
Key Business Model Attributes
Slide 9: Gaming-as-a-Service Business Model
Licensed Establishments Gaming-as-a-Service Business Model 1. Some large truck stops are eligible to host up to 10 VGTs. Terminal operators may also sell and maintain other amusement machines or other devices 2. Newly legislated tax / revenue sharing enacted to begin July 1, 2020 vs. current tax rat
Slide 10: Gaming-as-a-Service vs. Traditional Casinos
Gaming-as-a-Service Model has Numerous Advantages vs. Traditional Casinos Casinos Gaming-as-a-Service Advantages Primary Customer Relationship Individual Players ✘ Wide catchment area Small Businesses ✔ Highly local footprint B2B / business service play with long-term contracts Closest option for ga
Slide 11: Distributed Gaming… Standout for Growth Prospects
Distributed Gaming… Standout for Growth Prospects Making the most popular form of gaming… … more convenient drives outsized growth Nevada 1H19 LTM Revenue $ Millions Low-limit slots are a huge market that has been growing at double-digit rates in Illinois Source: Nevada Gaming Control Board, Illinoi
Slide 12: Gaming Has Been Resilient in Recessions
Gaming Has Been Resilient in Recessions Low-limit slots are resilient as consumers typically continue to engage in locally convenient, low cost forms of entertainment even in a recession Accel’s pipeline of signed locations provides a solid cycle buffer and as the economy weakens creates added incen
Slide 13: Attractive Unit Economics
Attractive Unit Economics 20% Corporate ROICs(1) Sustained ~20% Adj. EBITDA Margins Maintenance Capex: 1-2% of Revenue Average Payback on New Location: ~1.5 Years Average Residual Contract Length: 7.1 Years(2) 98% Contract Renewal Rate Robust unit economics driven by differentiated business model an
Slide 14: Strong Track Record of Growth Since Inception
Accel has Strong Track Record of Growth Since Inception Annual Gross Revenue ($mm) 50% CAGR Annual Adjusted EBITDA ($mm) 68% CAGR Accel has grown rapidly over the last 6 years through a combination of organic growth and M&A 1. Run-rate EBITDA analysis assumes current backlog of signed contracts go l
Slide 15: TAM / Growth Opportunities
TAM / Growth Opportunities
Slide 16: PF Accel – Geographic Location Density
PF Accel – Geographic Location Density Accel Standalone Locations (as of 1H19) Grand River Jackpot Locations (as of May 2019) 18 5 4 11 10 10 13 2 1 5 2 14 13 8 2 1 2 3 16 6 1 2 6 1 16 9 1 6 2 8 11 3 24 38 1 3 5 6 1 18 57 8 100 104 34 6 24 9 29 47 11 104 18 3 7 8 27 12 28 85 310 19 24 20 70 17 50 39
Slide 17: Significant Total Addressable Market Opportunity
Significant Total Addressable Market Opportunity Gaming-as-a-Service is the fastest growing segment in gaming and has a very large TAM New Markets(3) Existing Markets(2) 2025E TAM +New Products(4) $30-35bn +New Markets(3) $20-25bn Existing Markets(2) $10+bn Illinois 2025E(1) $3+bn Accel 2019E PF Rev
Slide 18: Estimated Video Gaming Opportunity in Illinois
Estimated Video Gaming Opportunity in Illinois 1. Based on retailer liquor license data from the Illinois Liquor Control Commission 2. Population counts from latest U.S. Census Bureau estimates. Slots counts based on state gaming boards’ annual reports as of FY 2018. Illinois data as of end of perio
Slide 19: Favorable Tailwinds for Continued Growth
Favorable Tailwinds for Continued Growth Stable New License Issuance (IL)… …Drives New Location Openings… ... And Steady VGT Growth Accel continues to outpace market growth Accel % Total 19% 18% 26% 26% 26% Source: Illinois Gaming Board, Accel management Statewide Licenses Issued # of Locations Tota
Slide 20: Fragmented Landscape in Illinois
Fragmented Landscape in Illinois (1) Prairie State Gaming is also known as Illinois Gaming Investors, LLC and was acquired by Penn National Gaming in July 2015 Represents total signed contracts pending go-live as of 6/30/19 Source: Illinois Gaming Board, Scientific Games terminal operator portal, Ac
Slide 21: Growth Opportunities Both In and Out of Illinois
Growth Opportunities Both In and Out of Illinois Addition of 6th VGT at Each Licensed Establishment Legalization of VGTs in Chicago Potential Addition of Sports Betting Player Tracking / Loyalty Programs Other use of “tethered distribution” model Accel has numerous avenues available to pursue future
Slide 22: Near-term Opportunities Future Growth Drivers
Near-term Opportunities Future Growth Drivers Multiple Additional Non-modeled Growth Levers Accel stands to benefit from a number of potential non-modeled upside opportunities New Products Potential to put sports betting kiosks into existing locations Accel can provide above-board and competitive al
Slide 23: Q2 2019 Update
Q2 2019 Update
Slide 24: Key Q1 and Q2 KPIs – Industry-Leading Growth
Key Q1 and Q2 KPIs – Industry-Leading Growth(1) Locations (#) Revenue ($mm) Video Gaming Terminals (“VGTs”) (#) Adjusted EBITDA ($mm)(3) Average Hold per Day ($)(2) Backlog (as of Q2 2019) 1. Prior to Grand River Jackpot acquisition 2. Hold Per Day (HPD) calculated as net terminal income / days per
Slide 25: Accel Revenue Growing Rapidly Year over Year
Accel Revenue Growing Rapidly Year over Year Revenue Growth (%) Accel has grown revenue well in excess of the broader industry over the last two years Source: Accel management as of June 2019, SunTrust Robinson Humphrey Research.
Slide 26: Location Trends by Vintage
Location Trends by Vintage Revenue by Vintage ($mm)(1) Stable base of topline growth and predictable revenue maturation curve as new locations are signed up Hold Per Day per Month since Opening by Vintage ($)(2) 1. Run-rate revenue based on annualized revenue from pre-2019 installed base and adjuste
Slide 27: Grand River Acquisition Update
Grand River Acquisition Update
Slide 28: Accel is a Disciplined Buyer
Accel is a Disciplined Buyer Acquired locations typically improve performance as a result of Accel’s operating rigor Acquired Year: 2013 2014 2014 2014 2016 2017 2018 2018 # Locations Acquired 51 8 10 27 122 121 23 71 Total % Increase +68% +59% +58% +41% +13% +14% +4% +8% Source: Accel management as
Slide 29: Grand River Jackpot – Company Overview
Grand River Jackpot – Company Overview Accel’s M&A Playbook Grand River Jackpot – Key Facts As of May 2019: Locations: 446 Live VGTs: 1,854 Average HPD: ~$84 Average Remaining Contract Term: 5.8 years 2019E Revenue: $57 million 2019E Adjusted EBITDA: $12 million Outlook: low to mid-teens near-term E
Slide 30: PF Accel – Geographic Location Density
PF Accel – Geographic Location Density Accel Standalone Locations (as of 1H19) Grand River Jackpot Locations (as of May 2019) 18 5 4 11 10 10 13 2 1 5 2 14 13 8 2 1 2 3 16 6 1 2 6 1 16 9 1 6 2 8 11 3 24 38 1 3 5 6 1 18 57 8 100 104 34 6 24 9 29 47 11 104 18 3 7 8 27 12 28 85 310 19 24 20 70 17 50 39
Slide 31: Regulatory Update
Regulatory Update 4 -
Slide 32: Illinois Regulatory Update
Illinois Regulatory Update Regulatory Update & Impact on Accel Run-Rate EBITDA(1) New gaming expansion bill passed in June increased the maximum number of VGTs per location from 5 to 6 (some large trucks stops are now eligible for up to 10 VGTs) On August 14th, emergency rules for issuing keys to Te
Slide 33: Model Drivers
Model Drivers 4 -
Slide 34: Simple Economic Model Building Blocks
Annual Location Growth Predictable Maturation Curves Consistent trend across vintages of steady improvement in hold per day with no sign of saturation. Currently $139 HPD on average for Standalone Accel, pro forma for GRJ blended HPD will be ~$125 for 2019E 3-5% same store sales growth Long-term Con
Slide 35: Location Portfolio Building Blocks
Location Portfolio Building Blocks Accel’s Annual Licenses Won Accel’s Historical Churn Accel’s Competitive Wins Average ~7 Months for Location to Go Live Average ~3 Years for Location to Go Live Accel % Total 19% 18% 26% 26% 26% +40-60 competitive conversions +240-260 new openings Historical Renewa
Slide 36: Accel Location Growth Components
Accel Location Growth Components Steady organic growth enhanced by strategic M&A Source: Accel management as of June 2019 (1) Net 2016+ Acquisitions are net of rationalization of underperforming locations. (1) % Organic Growth Since 2016 32% 64% 69% 39%
Slide 37: Location Trends by Vintage
Location Trends by Vintage Revenue by Vintage ($mm)(1) Stable base of topline growth and predictable revenue maturation curve as new locations are signed up Hold Per Day per Month since Opening by Vintage ($)(2) 1. Run-rate revenue based on annualized revenue from pre-2019 installed base and adjuste
Slide 38: Tax Rate, Capex and Working Capital
Tax Rate, Capex and Working Capital Tax Assumptions Accel is a cash tax payer with an assumed corporate tax rate of 29% Tax D&A from existing assets expected to be ~9% of revenue PLUS bonus depreciation equal to 100% of current year capex Facilities & Maintenance Capex Historically facilities and ve
Slide 39: Accel – Pro Forma Financials
Accel – Pro Forma Financials # Locations Revenue ($mm) Adjusted EBITDA ($mm) Capital Expenditures ($mm) Grand River’s acquisition reinforces Accel’s strong growth and low capital intensity business model (1) (1) (1) (1) PF 2020 and 2021 EBITDA range driven by timing of implementation of regulatory c
Slide 40: Transaction Update
Transaction Update 4 -
Slide 41: Accel vs. Publicly-Traded Comparable Companies
PF Accel Gaming Peers Above 10% ROIC Gaming Peers Below 3x Net Leverage Route-Based Service Peers 2019E Net Leverage 2019E-2021E Revenue CAGR ROIC(1) 2020E TEV / Adj. EBITDA 2020E TEV / Unlevered FCF 2021E TEV / Adj. EBITDA 2021E TEV / Unlevered FCF Accel vs. Publicly-Traded Comparable Companies Acc
Slide 42: Accel vs. Gaming Peers
Accel vs. Gaming Peers 1. Unlevered FCF calculated as Adjusted EBITDA less total capex 2. ROIC defined as operating profit after tax divided by average invested capital as of 1H 2019. Accel’s ROIC as of FY 2019 Note: 2018 EBITDA for peers is pro forma for acquisitions to date to make organic growth
Slide 43: Accel's Business Model vs. Peers
Accel’s Business Model vs. Peers Focus on Route Density & Optimization ✔ ✘ ✔ Strong Recurring Revenue ✔ ✘ ✔ High Customer Retention ✔ ✘ ✔ Low Fixed Costs ✔ ✘ ✔ Low Capital Intensity ✔ ✘ ✘ Accretive / High Synergy M&A ✔ ✔ 2018-2020E Organic Revenue CAGR(1) 20-23% ~6% ~3% 2020E Adjusted EBITDA Margin
Slide 44: Key Transaction Terms
Key Transaction Terms Transaction Highlights Enterprise value to Pace shareholders of $984mm (8.4x – 8.9x 2020E Adj. EBITDA, 10.5x – 11.3x 2020E Unlevered FCF) $461mm from Pace cash in trust, including interest, and $48mm PIPE raise Post money net debt balance of $84mm Pace Sponsor and certain direc
Slide 45: Summary Transaction Terms – Pro Forma Grand River Acquisition
Summary Transaction Terms – Pro Forma Grand River Acquisition Sources & Uses (Estimated) Pro Forma Valuation Post Transaction Ownership (Estimated)(5) PF Capitalization (Nov-19 Est. Closing) (4) (4) 1. Transaction share price based on amount of cash in trust including interest as of 6/30/2019; PIPE
Slide 46: Post-Transaction Balance Sheet Firepower
Post-Transaction Balance Sheet Firepower Illustrative Balance Sheet Capacity Accel will have significant flexibility to pursue multiple growth avenues for value creation Note: Projections are Pace estimates. With respect to projections, see page 2 “Use of Projections” under “Important Information”
Slide 47: Accel has a Straightforward Value Creation Plan
Accel has a Straightforward Value Creation Plan Execute on Backlog to Deliver Growth Benefit from Gaming Expansion Bill Invest for Sustained Growth Use Strong Balance Sheet Accel is executing on its strategic vision to drive value creation for shareholders New Locations Competitor Conversion Refill
Slide 48: Transaction Timeline
Transaction Timeline Date Event June 2019 $45 million PIPE committed (upsized by $3 million in August) Transaction Agreement executed / announced July 2019 Accel shareholders issued drag notice Preliminary Extension proxy filed with the SEC Shareholder lawsuit Filed August 2019 Shareholder lawsuit v
Slide 49: Appendix
Appendix
Slide 50: Potential Successor Board
Potential Successor Board Proposed Board of Directors Relevant Experience Andy Rubenstein CEO Karl Peterson Gordon Rubenstein Eden Godsoe Kathleen Philips David “Buzz” Ruttenberg TBD
Slide 51: Historical Financial Summary
Historical Financial Summary 1. Video Gaming Expenses includes Illinois state gaming taxes, Scientific Gaming revenue sharing, and Location revenue sharing. Note: With respect to Non-GAAP financial measures, see page 2 "Use of Non-GAAP Financial Measures" under Important Information and page 52 "Non
Slide 52: Non-GAAP to GAAP Reconciliation
Non-GAAP to GAAP Reconciliation 1. Stock-based compensation consists of options, restricted stock units and warrants 2. Calculated by excluding the impact of the non-GAAP adjustments from the current period tax provision calculations
Slide 53: Illustrative Fully Diluted Share Count
Illustrative Fully Diluted Share Count 1. Of original 11.25mm founder shares, TPGH sponsor has agreed to the cancellation of 1.25mm shares at closing, deferral of 2mm shares subject to earnout triggers, and transfer of 0.5mm shares to a foundation for charitable efforts in the communities Accel curr
Slide 54: Glossary of Terms
Go Live – the assigned date a location’s VGTs are activated and available to the public for play Hold Per Day (HPD) – post-acquisition net video gaming revenue per VGT per day Illinois Gaming Board (IGB) – state agency that regulates both casino gaming and video gaming in Illinois. Comprised of a fi