ACCEL ENTERTAINMENT, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024

Accel Entertainment Delivers Solid Financial Performance in Q2 2024

Accel Entertainment, Inc., a leading distributed gaming operator in the United States, has reported its financial results for the second quarter of 2024, showcasing continued growth and strong operational execution. The company’s diversified business model, strategic acquisitions, and focus on customer service have enabled it to navigate the evolving macroeconomic landscape and deliver impressive financial results.

Financial Highlights

For the three months ended June 30, 2024, Accel Entertainment reported total net revenues of $309.4 million, an increase of 5.7% compared to the prior-year period. This growth was primarily driven by a 5.7% increase in net gaming revenue, which reached $293.2 million. The company also saw increases in manufacturing revenue (17.6%) and ATM fees and other revenue (7.7%), while amusement revenue declined slightly by 1.6%.

On the profitability front, Accel Entertainment reported net income of $14.6 million, a 46.1% increase compared to the second quarter of 2023. This strong bottom-line performance was supported by effective cost management, with the company’s total operating expenses increasing by a more modest 8.8% year-over-year.

The company’s Adjusted EBITDA, a non-GAAP metric that provides a clearer picture of the underlying business performance, reached $49.7 million, up 6.5% from the prior-year period. Adjusted net income, another non-GAAP measure, increased by 4.6% to $21.4 million.

Operational Highlights

Accel Entertainment’s operational performance was equally impressive, with the company continuing to expand its footprint and enhance its service offerings. As of June 30, 2024, the company operated 4,034 locations, an increase of 4.7% compared to the same period in 2023. This growth was driven primarily by the company’s expansion in Illinois, which saw a 4.7% increase in locations, as well as strong performance in Nebraska, where the number of locations grew by 21.3%.

The total number of gaming terminals installed across Accel Entertainment’s network reached 25,757, up 5.7% from the prior-year period. This increase was led by Illinois, which saw a 6.6% rise in gaming terminals, and Nebraska, which experienced a 38.6% surge.

The company’s location hold-per-day, a key metric that measures the average daily revenue generated per location, remained relatively stable, with a 0.5% increase in Illinois, a 7.6% rise in Montana, and a 7.6% improvement in Nebraska. This demonstrates the company’s ability to maintain strong operational efficiency and customer engagement across its diverse geographic footprint.

Macroeconomic Factors and Outlook

Accel Entertainment’s management team has been closely monitoring the evolving macroeconomic landscape, which has been characterized by ongoing interest rate uncertainty, persistent inflation, and potential instability in the U.S. and global banking systems. While the company has not observed any material impacts on its business or outlook thus far, it remains vigilant and prepared to take appropriate financial or operational actions if necessary.

To mitigate potential risks, the company has accelerated certain capital expenditures related to gaming machines and related components to manage its supply chain. Additionally, the company intends to continue monitoring macroeconomic conditions closely and may determine to take further actions in response to any adverse developments that could impact its business.

Despite the uncertain economic environment, Accel Entertainment remains optimistic about its future prospects. The company’s diversified business model, focus on customer service, and strategic investments in growth initiatives position it well to navigate the challenges and capitalize on the opportunities that may arise.

Expansion and Acquisition Efforts

Accel Entertainment has been actively pursuing strategic growth opportunities, both organically and through acquisitions. The company’s pending acquisition of the FanDuel Sportsbook & Horse Racing in Collinsville, Illinois, as discussed in the financial report, is a testament to its commitment to expanding its footprint and diversifying its service offerings.

The company’s expansion efforts have also included the launch of operations in new states, such as Montana, Nevada, and Nebraska, where it has established a strong presence and continues to grow. These strategic moves have enabled Accel Entertainment to enhance its geographic diversification and capitalize on emerging market opportunities.

Liquidity and Capital Resources

Accel Entertainment maintains a strong financial position, with $254.9 million in cash and cash equivalents as of June 30, 2024. The company’s primary sources of liquidity include its cash flows from operations, as well as its $150 million revolving credit facility and $400 million delayed draw term loan facility, which provide ample flexibility to fund its ongoing operations, capital expenditures, and strategic initiatives.

As of June 30, 2024, the company had $267 million of available borrowing capacity under its credit facilities, and the weighted-average interest rate on its outstanding debt was approximately 7.7%. Accel Entertainment remains in compliance with all debt covenants and expects to continue meeting its financial obligations in the foreseeable future.

The company’s management team has also implemented measures to manage its exposure to interest rate risk, including the use of interest rate caplets, which have provided a degree of protection against fluctuations in interest rates.

Conclusion

Accel Entertainment’s second-quarter 2024 financial results demonstrate the company’s ability to navigate the evolving macroeconomic landscape and deliver strong operational and financial performance. The company’s diversified business model, strategic acquisitions, and focus on customer service have been key drivers of its success, positioning it for continued growth and value creation.

As the company looks ahead, it remains vigilant in monitoring macroeconomic conditions and prepared to take appropriate actions to mitigate any potential risks. With a strong balance sheet, ample liquidity, and a robust pipeline of growth opportunities, Accel Entertainment is well-positioned to capitalize on the evolving distributed gaming market and deliver long-term value for its shareholders.