Accel Entertainment Q2 Earnings Call Highlights

Accel Entertainment NYSE: ACEL reported record second-quarter revenue and adjusted EBITDA, citing higher productivity in Illinois, growth in developing markets and continued preparation for the opening of video gaming terminals in Chicago. Revenue rose 10% year over year to $368 million, while adjusted EBITDA increased 11% to a record $59 million. Operating income was $32 million, up from $27 million in the prior-year quarter. Net income increased to $13 million from $7 million, and diluted earnings per share rose to $0.15 from $0.08. The company ended the quarter operating nearly 4,700 locations and more than 29,000 gaming terminals, representing year-over-year increases of 6% and 7%, respectively. Founder, Chairman and Chief Executive Officer Andy Rubenstein said the results reflected the durability of Accel's distributed gaming model, growth in its largest market and contributions from developing markets. Illinois remained the foundation of Accel's business. Revenue from Illinois distributed gaming operations, excluding Fairmount Park, rose 6% year over year, supported by higher hold per day and a higher-performing customer mix. Average Illinois location hold per day increased 9% to $992, even as the company’s Illinois location and terminal counts declined modestly. President Mark Phelan said the company is prioritizing route quality rather than absolute machine or location growth. Locations added to the Illinois route generally have higher performance, while locations removed were often lower-volume, unprofitable or independently closed establishments, he said. Accel also completed the rollout of ticket-in, ticket-out technology, or TITO, across its Illinois installed base. Phelan said the technology has received encouraging customer feedback and is beginning to reduce the amount of cash held in the field, which could improve working capital over time. Rubenstein said it was difficult to isolate any revenue contribution from TITO but that the company believes it reduces friction for players. Chicago remained a central near-term opportunity. The Illinois Gaming Board issued establishment licenses for video gaming locations in June and July, and Accel had been approved for 17 of the 39 establishments licensed to date, or about 44%. The city’s Department of Business Affairs and Consumer Protection has begun accepting and processing city video gaming license applications. Rubenstein said Accel expects the first Chicago establishments could begin operating in the coming weeks, although the precise timing remains uncertain. The company has staged equipment, mapped routes and prepared logistics infrastructure for deployments.