Accel Entertainment ACEL
November 08, 2021 - 3:07pm EST by
2021 2022
Price: 13.40 EPS 0.47 0.84
Shares Out. (in M): 94 P/E 28.06 15.77
Market Cap (in $M): 1,220 P/FCF 0 0
Net Debt (in $M): 148 EBIT 135,862 213,706
TEV (in $M): 1,368 TEV/EBIT 10.07 6.40

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ccel Entertainment --“Betting on distributed gaming”

Total Opportunity: Accel and Century Gaming Acquisition


*VGT: Video Gaming Terminal

* Century's Acquisition was announced on 3rd March 2021 and will take place by the start of 2022


NEGATIVE: Accel is concentrated in Illinois, keeps growing at low rates (less than 1 Bn USD Opportunity) and Century Gaming acquisition fails.

BASE: Accel continues to grow in Illinois (1.5 Bn USD Opportunity), Century Gaming acquisition in 2022.

POSITIVE: Accel continues to grow in Illinois (2 Bn USD Opportunity), Century Gaming acquisition in 2022 and expansion to other states (GA, PA)


"Distributed gaming industry, a sweet spot for gamers, businesses, terminal operators and regulators."


- Accel Entertainment represents an attractive investment opportunity. Based on recent distributed gaming regulatory changes across multiple states, a small, leading, non-casino, video gaming terminal (VGT) operator presents a strong growth potential. As state deficits keep growing and new sources of revenue are needed, tax collection from authorized gaming machines serves as an engaging alternative and a strong catalyst for faster regulatory approval. Moreover, for establishments hit hard by COVID, video gaming terminals offer a diversified income from their main line of business.

- Accel operates 32% of the market share in Illinois with 13,177 VGTs in 2,527 locations. By 2023 it is expected to operate 27,087 terminals in 4,230 establishments across 5 US States. Accel has a highly scalable business model where long-term contracts (8 years) are established with business owners and after-tax gaming revenues are split between contractors. Growth is mainly led by an increase in number of machines and locations within operating states (GA, IL) and Accel's entrance into new jurisdictions (NV, MT, PA). Accel's opportunity has strong cash flow generation, and its market valuation is low relative to our estimates and comparable company valuations (see Appendix 1, Exhibit 3). Our Revenue and EBITDA multiples are 1.85x and 10.07x, respectively; in 3 years they are expected to be 0.84x and 4.57x vs. comparable at 1.89X and 7.78X, respectively. Our model captures Accel's capacity to consolidate a fragmented market through targeted M&As and introduction of Accel's business model to multiple states as regulatory changes occur.

Why does the opportunity exist?

- Distributed gaming is a new segment from the gaming industry which mainly depends on regulatory approvals. There are few dominating participants in the industry that can comply with these regulations. Accel is a pure play strategy in distributed gaming, it has economies of scale and capability to address regulatory issues and expansion opportunities.

- Moreover, the market is already distrustful of anything that comes out of a SPAC and believes the new business model is not sustainable in the long term. However, we believe Accel has strong fundamentals, with a scalable model that can offer attractive returns in the following years.

Company Description:

- Accel Entertainment is a leading video gaming terminal (VGT) operator in Illinois, providing slot machines and amusement recreation devices to authorized non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores, truck stops, and grocery stores. Today Accel operates one third of VGTs in Illinois and expects to expand into new jurisdictions. The company is characterized of being a strategic buyer of smaller, subscale VGT players.

- 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. Accel establishes long term relationships through contracts with establishments where machines are located. In its business model, revenues after gaming taxes are split (50/50) between the terminal operator and business owners.

1) Accel is Illinois leader in distribution gaming and continues to grow.

Accel has a strong market position in Illinois fragmented market. Accel's number of VGTs and locations has been steadily growing due to regulatory introduction of higher bet limits and allowance of 6th VGT in a licensed establishment. Organic growth will depend on Accel's rate of retention of new licenses (38% in 2021 vs. 29% in 2020) and distinction in its products and services.

2) Accel expansion into new targeted jurisdictions.

Increasing acceptance of distributed gaming in various states: Accel presents a highly scalable business model which allows easy expansion to these regulated states.

3) Accel establishes long-term contracts with business owners.

The contract serves as a record of commitment for both parties and mitigates risk. Accel is the owner and software provider for the machines. Establishments provide a location for them and take care of operating expenses. Revenue splits are established by law. Accel's average contract length is 8 years, and its average remaining contract life is 6.9 years with 99% renewal rate.

4) Distributed gaming: a highly fragmented market.

Fragmented market allows opportunity for inorganic growth through M&A. Accel is a strategic buyer, it has executed several deals that have led to increased market presence, revenue and cost synergies, and entrance into new markets:

  • Grand River Jackpot (2019)

  • TPG Pace Group (2019)

  • Tom's Amusement (2020)

  • Century Gaming (2022)


Details of Key Investment Factors:


  1. Growing Illinois Market position

    1. Fragmented market and low market penetration (compared to other states) allows opportunity for inorganic growth through M&A.

    2. Highly regulated and non-competitive market: Breakdown of Net Terminal Income (NTI) is established by law (see Appendix 2, Exhibit 3). New establishments depend on new license issuance. Long-term (8 years) contracts between locations and terminal operators.

    3. Distributed gaming in IL is a duopoly. Market share is determined by scalability, cost efficiency and quality service. Accel's key differentiators are its sales and marketing teams.

    4. Aging population and weather restrictions lead to an increase in demand for this type of recreational venues.


  1. Expand into targeted New Markets: Accel presents a scalable business model.

Century Gaming Acquisition

  • Century Gaming is made up of 2 business segments. The first one, the most important, and the largest, is the route operations. The operations are in Montana and Nevada. Century is headquartered in Montana. They have 10 service centers across the state. In Nevada, their primary focus, is Las Vegas, where the heavy concentration of the population is. They also have offices in Reno and Elko.

  • The other segment is Grand Vision Gaming, and it is a Class II [Class III] video gaming manufacturer. It develops proprietary custom software for gaming machines, and it manufactures the devices.

  • On March 3rd, 2021, Accel Entertainment announced the acquisition of Century Gaming in an all-cash deal worth $140 million. The deal is set to close by the beginning of 2022.

  • The deal has several potential revenue synergy opportunities. There are some cost synergies, but Century is known as a company that controls costs.

  • Accel expects to fund the deal through cash on hand and borrowings under its existing $100 million credit facility, in addition to a $5 million equity issuance (dilution of 469 shares).



  • Class B COAMs (Coin operated amusement machines). Max, 8 per establishment. 

  • More restricted market, with lower growth potential than other states.

  • By regulation there is a max. number of class B machines which are actioned once every 3 years.

  • Players do not receive winnings in cash, they receive store credit. 

  • More than 90% of GA Skill gaming locations are independently owned by convenience stores

  • 1 Bn Total State Gross Revenue 

  • 5600 Total Market Locations, 29000 Total Market Terminals

  • Accel is currently in 60 shops and talking to 100 new retail stores. 

  • Gross Revenue Split: 45% Location, 45% Operator, 10% GA Lottery.


Other Sates:



  • Restricted and emerging market: In 2017 a law was passed authorizing video gaming gambling on slot machine terminals in truck stops.

  • Gaming License fee required

  • Many requirements to apply for license: Must be located on at least 3 contiguous acres of property not owned by Pennsylvania Turnpike, must have a convenience store, must be equipped with diesel islands, have at least 20 parking spaces, sell at least 5000 gal of diesel per month on an annual basis.

What could go wrong?


  • Century Gaming acquisition fails: There is very little disclosed information on Century's acquisition, last update was that it was to occur at the start in 2022 instead of the last months of 2021. Due to COVID-related delays at state gaming boards.

  • Adverse economic conditions: COVID restrictions, economic recession or decreased discretionary spending. Accel is dependent on IL and any change in legislation would be detrimental.

  • Dependence on state regulation: Changes to government regulation and difficulty to obtain licenses.

  • Technological discontinuance: evolution of terminal gaming, people substituting distributed gaming for other type of entertainment, system security and cyber-attacks; however, we have found that the population that uses VGTs is older and spends in cash.

  • Breaking the law: Accel is highly regulated. Some bad actors in the industry do not follow the rules, which may tempt Accel if it ever loses market share.

Appendix 1: Financial Model Drivers

Exhibit 1: Accel's Growth Potential with Century Gaming Acquisition

Exhibit 2: Accel's Potential Video Gaming Terminals by State

Exhibit 3: Accel's Potential Establishments by State


Exhibit 4: Average Net Terminal Income per VGT

* Net Terminal Income: for every dollar that is put into the video gaming terminal, minus the credits paid out to the winner.

* Century's Acquisition was announced on 3rd March 2021 and will take place by the start of 2022

Exhibit 5: Accel's Net Debt

Exhibit 6: Comparable

Appendix 2: Additional Visuals

Exhibit 1: Illinois Duopoly and Fragmented Market

Exhibit 2: Stable New License Issuance in Illinois

Exhibit 3: Regulatory breakdown of Net Terminal Income in Illinois

Exhibit 4: Contract Length FCF per Establishment

Exhibit 5: Eight Year Contract Unit Economics for Illinois


  1. The average total daily wager per player in IL is $20 USD. We obtained this number from calls we had with establishments.

  2. By regulation the maximum wager in each handle is $4.00 USD. 

  3. Each player reinvests wager and stops playing after losing ~30% of the money played. As the maximum wager in IL per handle is $4.00 USD, we estimate that each gamer plays 5 rounds of $4.00 USD with reinvestment.

  4. Increased perceived payrate from slot machines incentives gamers to play more handles in each round. This generates marginal revenue increases for terminal operators as gaming customers are willing to play more handles in each round and VGT utilization rate goes up.


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


Continued growth in IL as COVID retreats, and the increased value per handle rises on a larger base now that establishements have 6 VGTs. 

Merger of Century Gaming in 1H2022 will highlight the growth ACEL has outside of its current market. 

More favorable news on the regulatory front from a 7th VGT, increased price per handle and other states permitting Distributed Gaming simlarly to IL. 


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