Accel Entertainment, Inc. — 2019 Q2 filing summary
Important scope clarification: The supplied 10-Q is filed by TPG Pace Holdings Corp., a special-purpose acquisition company (SPAC), not by Accel Entertainment. Its financial statements reflect the SPAC’s pre-combination activities and do not report Accel’s standalone operating results. The filing describes Accel as a proposed acquisition target operating approximately 8,000 video game terminals in more than 1,700 locations.
Business context and reporting period
The unaudited report covers the quarter and six months ended June 30, 2019. TPG Pace’s activity consisted primarily of evaluating acquisition targets and pursuing a proposed business combination to acquire Accel. The transaction had not closed as of the filing; an amendment to the agreement was entered into on July 22, 2019.
Financial metrics
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Professional fees and other expenses | $4.42 million | $0.17 million | $4.58 million | $0.45 million |
| Interest income | $2.57 million | $1.80 million | $5.11 million | $3.22 million |
| Net income (loss) | $(1.84) million | $1.63 million | $0.53 million | $2.76 million |
| Basic and diluted EPS | $(0.03) | $0.03 | $0.01 | $0.05 |
At June 30, 2019, cash outside the trust account was $692,097; trust investments totaled $461.28 million; current liabilities were $4.28 million; and working capital was negative $3.59 million. Total liabilities included $15.75 million of deferred underwriting compensation, payable only if a business combination is completed. The filing reports no long-term debt. Six-month operating cash flow was positive $179,270, including a $4.03 million increase in accrued expenses and a $750,000 trust-interest withdrawal; cash rose from $512,827 at year-end 2018. Profit margins are not meaningful for this pre-combination SPAC, which reported no revenue.
Changes versus prior comparable periods
- Q2 moved from net income of $1.63 million to a $1.84 million net loss, as professional fees and other expenses rose substantially and exceeded trust interest income.
- For the first six months, net income declined to $0.53 million from $2.76 million, despite higher interest income, as expenses increased.
- Trust investments increased from $456.92 million at December 31, 2018 to $461.28 million at June 30, 2019. Current liabilities rose from $252,472 to $4.28 million, largely due to transaction-related professional fees.
Transaction, outlook, and risks
The proposed transaction contemplated acquiring all outstanding Accel common and preferred shares, followed by a merger into a wholly owned subsidiary. Accel shareholders could elect cash at $177 per share or stock valued at approximately $10.22 per share, subject to transaction terms and adjustment if aggregate cash elections exceeded $350 million. A concurrent private placement of approximately $45 million was intended to fund part of the cash consideration. Closing remained subject to customary conditions, including shareholder approvals, antitrust clearance, and Pennsylvania Gaming Control Board approval. The filing provides no Accel operating forecast or specific earnings guidance.
TPG Pace’s business-combination deadline was September 30, 2019, with an extension to December 31, 2019 requiring shareholder approval. Failure to complete a combination by the applicable deadline would require liquidation and redemption of public shares; warrants would expire worthless. Management stated that these requirements, along with funding uncertainty, raised substantial doubt about the SPAC’s ability to continue as a going concern. The company had limited cash outside the trust and expected further transaction expenses; additional funding might be needed, with no assurance it could be obtained. The amended transaction agreement extended the date for termination if closing had not occurred from September 30 to November 30, 2019. This transaction-agreement date is distinct from the SPAC’s charter deadline.
Key facts investors should verify
- Review Accel’s own financial statements and operating disclosures; they are not included in this SPAC 10-Q.
- Confirm whether the proposed acquisition closed, the final consideration mix, cash elections, financing, and resulting share dilution.
- Verify shareholder approvals, regulatory clearances, and any extension of the SPAC’s liquidation deadline.
- Assess the SPAC’s ability to meet accrued expenses and other obligations if the transaction is delayed or does not close.
- Confirm the treatment of the $15.75 million deferred underwriting fee and public-share redemptions at closing.