Accel Entertainment, Inc. Q1 FY2025 earnings call

• Record Q1 revenue and adjusted EBITDA with 7% YOY growth. - Stable growth in Illinois and Montana; strong growth in Nebraska and Georgia; Nevada had a decline due to loss of key customer. - Completed integration of Louisiana acquisition, adding 96 locations and 614 terminals. - Fairmount Park Casino opened on April 18, first racino in Illinois history. - Refining customer acquisition and retention efforts for profitable sales growth. - Decentralized model with capital spread across multiple states, providing diversification and flexibility. - Identified efficiencies and growth opportunities to expand free cash flow.

Total revenue for Q1 2025 was $344 million, the highest quarterly revenue since going public, with adjusted EBITDA of $50 million. Both revenue and adjusted EBITDA grew 7% year-over-year. Key markets: Illinois had 4% Q1 year-over-year revenue growth, Montana 8%, Nebraska and Georgia had double-digit growth, while Nevada experienced a small revenue decline due to loss of a key customer. The recently acquired Louisiana operations added 96 locations and 614 terminals. Revenue per location in core states: Illinois was $885 per day (+2.9% YOY), Montana $610 per day (+2.7% YOY), Nevada $802 per day (-5.3% YOY), Louisiana $972 per day, Nebraska $263 per day (+12.9% YOY), Georgia $145 per day (+59.3% YOY).

• Full year CapEx forecast $75 million to $80 million: $39 million to $41 million in existing markets, $5 million to $7 million in Louisiana, $31 million to $32 million for Fairmount. - Post-Fairmount and Louisiana, normalized annual CapEx expected $40 million to $45 million. - Repurchased 1 million shares at an average purchase price of $10.34 per share in Q1.

• Forward-looking statements subject to risks and uncertainties. - Actual results may differ materially from forecasts. - Impact of tariffs on construction costs, though minimal impact noted. - Market competition in distributed gaming.

Q: Hi, good afternoon, Andy, Matt, Mark, congrats on the record Q1, And Matt, best of luck with everything going forward. Wanted to start with the tariff impact. So you know it's been several weeks since Liberation Day. We've heard from some of the competitors or other players in the space with maybe bigger projects that they have. This is a year where you do actually have a slightly bigger project. So just wondering how you're thinking about this impact near term. I know you just gave guidance for CapEx, but how you're thinking about what this could mean and if this changes at all, how you're thinking about future growth with other opportunities.

A: Thanks Chad. This is Andy. As far as our existing business, most of our CapEx spend for the year has been the prices have been locked in so we, it will have minimal effect on us. We've seen minor effect in parts as we look forward in terms of the Fairmount construction, I'll let Mark give that answer. But consumer demand continues to be strong, so we haven't seen any turf impact from that perspective. Go ahead, Mark.

Q: Hi, Chad. So in terms of construction, obviously steel's gone up a significant amount and you'd use a bunch of that in the Phase 2 project. But given the sort of volatility of laws and announcements and tariffs, it's really hard to tell the project that the Phase 1 project was well finished and prices were well set before any of these tariffs hit. So right now there doesn't seem to be much of an impact.

Q: Okay, great to hear. And then on the performance, I guess two-parter, we've heard a lot of companies call out weather in the first quarter. Are you able to quantify maybe what this impact may have been for your portfolio? And then more importantly, you said that April trends, I guess we're through all of April, haven't really changed in terms of the strength with the consumer. Can you just confirm that and are you seeing any pockets of weakness across the fleet?

A: Hi, Chad, it's Matt. And thanks for the wishes at the beginning. We'll take that one part in. Weather all in all, pretty neutral when we look at it quarter-over-quarter, right? There's always a cold week here, a rainy week there. But as Andy talked about, we're well diversified, so weather was a neutral factor in a good, positive way. When it comes to the other piece of your question, April is trending like we expect it to. We are not seeing sort of that any sort of change in consumer behavior. It's a busy season for us with tax refund season, but kind of pleased to report that everything's following our initial forecast for the year, despite some of the recent political events.

Q: Hi, good afternoon, everybody. Matt, thanks for all your help over the years and good luck with your future endeavors. Just looking at Illinois, it looks like locations were down again quarter-over-quarter, location win per day, up year-over-year. Is that still part of the strategy to kind of prune the bottom part of the portfolio?

A: Thanks, Steve. This is Andy. Yes, we're continuing on that program and to be honest, it will be a continuous part of our optimization of our business. We are always looking to increase our profitability, look at - evaluate locations that aren't performing where the margin isn't what we expect and reallocate the assets into better performing situations. We have this whole utilization of our equipment reinforces our efforts to scale to our new markets, improve our return on those investments and really optimize our overall CapEx expenditures and which ultimately will help our free cash flow. So I think you'll see this program continue market after market as it's a natural evolution of our business.

Q: Okay. Thank you. And then just wanted to follow-up if you couldn't give us any more color on how Louisiana is going. If the same kind of Illinois strategy applies to some of the other Montana, Nevada, Louisiana, Nebraska markets also if we could get kind of an update there on the strategy.

A: Steve, yes, I'll take Louisiana and I'll let Mark provide some color on Georgia and Nebraska. So Louisiana very early, obviously we just closed in the latter part of Q4. It's all trends and early indications are very positive. We were accomplishing a lot of the remodeling, updating, optimization that we had planned for and the results of that today has been very positive and indicating that we should continue down that trend. So we'll keep you abreast as that progresses in the future quarters. Go ahead, Mark.

Q: Hi Steve, I'll try to kind of give an overview of all the markets, but generally as Andy pointed out, we spent a fair amount of time and effort in the last four years expanding outside Illinois and I think now you're starting to see the fruits of that process as we've integrated a lot of these markets and been able to share with them sort of common technology in the form of like payments and loyalty and customer service, as well as content in the form of electronic gaming machines, some of which are proprietary to Accel through GDG and some of which are third party made that we purchase and distribute to our different markets. Illinois continues to be the bedrock of this company and continues to outperform. Nevada, I would point out had a pretty robust growth and in part that's because of differentiated content strategy we have there where we have games Illinois has and therefore perform higher. You could say the same for Nebraska and Georgia as well, Steve although in those markets in particular we've been able to scale centuries technology acumen they've always been really good at technology because their markets are so competitive because it's not a - the red share there is negotiated. So they really had to differentiate themselves and we've been able to use their products, enhance them and apply them to these other markets where they're really differentiated and been able to allow us to grow much higher than sort of the market rate.

Q: Okay, great, thanks. And then just real quick, in the 1Q, was there any impact from Fairmount in the sports book or any startup costs we should be aware of?

A: Hi, Steve, it's Matt. I can take that. Yes, there were startup costs, right. We started the main hiring bulk came in March. So, we had that period of, call it a month, month and a half where the labor started hitting us ahead of any revenue. But as Mark discussed and Andy discussed, we're off to a good start in Fairmount. But yes, there were some startup in Q1.

Q: Great. Good afternoon, Andy, Matt and Mark. Thanks for taking the questions. Matt, really appreciate the help over the years and wish you all the best going forward. To touch on, I guess, Phase 1 with that being completed at Fairmount, could you maybe give us an update on the timing of Phase 2 and what are the key next steps from a regulatory standpoint?

A: I'll take that one, Greg. So one of the great things about Fairmount is it provides us a lot of optionality and that's why we chose sort of the Phase 1 approach. And so now that we have a casino up with improved food, beverage amenities and this single site location called Long Shots, which will be forthcoming, we have the potential and the ability to sort of see how it operates and see what kind of demand and supply we have there in terms of our competitors. And so I would say, we'll have a lot more clarity on this once sort of the racing season comes to an end, which is in October before we really want to sort of say what we're going to do for Phase 2. We're definitely going to have Phase 2, but we want to learn from the field and take its input and feedback before we kind of give a more formal answer.

Q: Got it. That's helpful. And if I could follow up on Louisiana, that was a stronger than expected performance in Q1, certainly a step up from the run rates when you acquire the businesses. Wanted to see if there's any drivers worth calling out there. Is that kind of seasonality or do you kind of view this as maybe the run rate being pretty sustainable prior to future growth in the state.

A: Thanks, Greg. This is Andy. I would say the run rate will continue to improve throughout the year as we are optimizing remodeling, a lot of the truck stops, so don't know where we're going to land. But I think we're on a real upward trends. And the market, although it's a mature market, has a lot of legacy equipment. And as we upgrade and do what we consider as best practices, as well as bring proprietary technology to the market, we will see us outperform what our competitors are doing in that market.

Q: Okay, that's fair, Andy. And I guess a last quick one. I'm pretty sure you touched on CapEx expectations, but I wanted to follow-up. I think I missed that piece of the prepared comments. What are the expectations for 2025 versus kind of the normalized level.

A: Hi Greg, it's Matt. And thanks for the wishes at the beginning of the Q&A. So 75 to 80 for 2025 split as follows; 5 to 7 for Louisiana, 31 to 32 for Fairmount, and that Fairmount includes some Phase 2 initial construction, and then 39 to 41 for our main market, shall we call it. Now that's for this year when we get everything done, we expect 40 to 45 for everything including Fairmount and Louisiana, plus all the main markets.