Accel Entertainment, Inc. Q3 FY2025 earnings call

Key Points

• Total revenue up 9.1% y-o-y to $330 million; net income $13 million; adjusted EBITDA up 11.5% to $51 million.
• Core markets Illinois and Montana drive 82% of revenue, with Illinois seeing same-store growth and TITO rollout; Montana benefits from proprietary gaming content.
• Developing markets Nebraska and Georgia show double-digit revenue growth; Nevada had modest decline due to customer loss.
• Louisiana, from Toucan acquisition, has 670 terminals in nearly 100 locations, showing positive results.
• Completed $900 million senior secured credit facility; repurchased $6.8 million of common stock; affirmed 2025 CapEx forecast of $75 million to $80 million.
• Fairmount Park has strong player engagement and revenue growth since April, with insights for Phase 2 expansion.

Total revenue for the third quarter was $330 million, up 9.1% year-over-year. Core markets Illinois and Montana together represent approximately 82% of revenue. Illinois: revenue increased 7% y-o-y to $239 million, driven by same-store performance and new machine placements; advancing TITO functionality. Montana: revenue increased 2.1% to $40 million, with proprietary gaming content enhancing profitability per location. Developing markets: Nebraska revenue grew 30% to $9 million, Georgia revenue rose 49.3% to $5 million; together represent just over 12% of total revenue. New markets: Louisiana contributed $9 million, from Toucan Gaming acquisition integration, with 670 terminals in nearly 100 locations. Fairmount Park: strong player engagement and revenue growth since April, with sequential monthly revenue growth.

Forward-Looking

• Affirmed full year 2025 CapEx forecast of $75 million to $80 million.
• Evaluating free cash flow uses including share buybacks, debt payoffs, and M&A on a case-by-case basis; patient with M&A, both transformational and bolt-on.
• Confident in long-term strategy with focus on growth in core, developing, and new markets; expects steady top-line growth and improving returns in 2026.

Risks

• Potential impact of changes in ownership or customer loss affecting revenue in markets like Nevada.
• Execution risks in CapEx deployment and M&A integration.
• Market competition and economic factors affecting gaming performance in various markets.

Q: Quarter of optimization with locations down and win per day up. How should we think about the Illinois strategy into the 4Q and 2026? And what is the potential upside from the rollout of the ticket in, ticket out from a revenue and cost standpoint?

A: Will continue to optimize route in Illinois; machine counts likely stable with growth in average revenue per machine. TITO rollout in early stages, effect to be noticeable mid-2026 in terms of cash balances and performance enhancement.

Q: On the balance sheet, how do you think about the uses of the free cash flow moving forward?

A: Cash used for loading redemption terminals in big routes like Illinois; underlevered relative to peers; patient with M&A, evaluating transformational vs bolt-on M&A on a case-by-case basis.

Q: Curious if you guys have seen any shift in seller expectations over the last couple of months in M&A?

A: No significant shift, but sellers realizing reduced multiples; patient with M&A as people recognize changed market dynamics.

Q: Priority of bolt-on M&A markets? And any change in Fairmount Park ramp?

A: Primary priority for bolt-ons is Louisiana; Fairmount Park has sequential monthly revenue growth, still in development stage with momentum ahead, reviewing Phase 2 expansion.