Earnings call transcript: Accel Entertainment Q2 2025 revenue rises, EPS misses

Accel Entertainment reported its Q2 2025 earnings, revealing a mixed financial performance. The company achieved a record quarterly revenue of $336 million, surpassing forecasts of $328.85 million, but missed on earnings per share, posting $0.08 against an expected $0.21. The stock reacted modestly in aftermarket trading, rising 0.24% to $12.35. According to InvestingPro analysis, the company maintains a "GOOD" overall financial health score of 2.8 out of 5, and current analysis suggests the stock is undervalued at current levels.

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Key Takeaways

• Record quarterly revenue of $336 million, a 9% year-over-year increase.
• EPS of $0.08 fell short of the $0.21 forecast, a 61.9% miss.
• Stock price increased by 0.24% in aftermarket trading.
• Strong revenue growth in Illinois and Montana.
• Continued focus on mergers and acquisitions in the gaming market.

Company Performance

Accel Entertainment’s Q2 2025 performance was characterized by record revenue growth, driven by strong performances in Illinois and Montana. The company reported a 9% year-over-year increase in revenue, highlighting its robust market position. However, the significant miss on EPS suggests challenges in managing costs or achieving expected profit margins.

Financial Highlights

• Revenue: $336 million, up 9% year-over-year.
• Earnings per share: $0.08, a 61.9% miss from the forecast.
• Adjusted EBITDA: $53 million, a 7% increase year-over-year.
• Capital Expenditures: $26 million in Q2.

Earnings vs. Forecast

Accel Entertainment’s EPS of $0.08 was significantly below the forecast of $0.21, representing a 61.9% miss. Despite the revenue beat, the EPS miss indicates potential operational or cost-related issues that need addressing. This deviation from expectations is notable when compared to previous quarters, where the company has generally met or exceeded earnings forecasts.

Market Reaction

Following the earnings release, Accel Entertainment’s stock rose by 0.24% in aftermarket trading to $12.35. This modest increase suggests that investors are cautiously optimistic, possibly due to the record revenue figures despite the EPS miss. The stock has shown strong momentum, delivering an 18.6% return over the past year and trading near its 52-week high of $13.27. With a current ratio of 2.42, the company maintains strong liquidity to support its operations.

Outlook & Guidance

Looking ahead, Accel Entertainment remains focused on growth through mergers and acquisitions in the fragmented local gaming market. The company anticipates continued revenue, adjusted EBITDA, and free cash flow growth. Capital expenditures are expected to normalize at $40-45 million annually after current projects conclude. Analysts maintain a Strong Buy consensus on the stock, with two analysts recently revising their earnings estimates upward for the upcoming period.

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Executive Commentary

CEO Andy Rubinstein highlighted the attractiveness and resilience of the local gaming market, stating, "Local gaming is an incredibly attractive, resilient, and a growing segment." He also emphasized the company’s competitive advantage in scale, which is crucial for maintaining market leadership.

Risks and Challenges

• Potential cost management issues affecting EPS.
• Market saturation in key regions like Illinois.
• Regulatory changes impacting gaming operations.
• Economic downturns affecting consumer spending on gaming.
• Competition from other gaming operators.

Q&A

During the earnings call, analysts inquired about the consistency of Illinois market performance and the company’s M&A strategy. Management confirmed stable performance and a focus on smaller, adjacent market opportunities, reflecting a strategic approach to expansion.

Full transcript - Accel Entertainment Inc (ACEL) Q2 2025:

Jason, Moderator: Good afternoon, and thank you for attending the Xcel Entertainment second quarter earnings call. My name is Jason, and I’ll be the moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I’d now like to pass the conference over to your host, Scott Levin.

Scott Levin, Investor Relations, Xcel Entertainment: Welcome to Xcel Entertainment’s second quarter twenty twenty five earnings call. Participating on the call today are Andy Rubinstein, Excel’s chief executive officer and Mark Phelan, Excel’s president of US Gaming and acting CFO. Please refer to our website for the press release and supplemental information that will be discussed on this call. Today’s call is being recorded and will be available on our website under Events and Presentations within the Investor Relations section of our website. Some of the comments in today’s call may constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward looking statements are subject to risks and uncertainties. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward looking statements section of the earnings press release available on our website as well as other risk factor disclosures in our filings with the SEC. Any projected financial information presented in this call is for illustrative purposes only and should not be relied upon as being predictive of future results. The inclusion of any financial forecast information in this call should not be regarded as a representation by any person that the results reflected in such forecasts will be achieved.

During the call, we may discuss certain non GAAP financial measures. For reconciliations of the non GAAP measures as well as other information regarding these measures, please refer to our earnings release and other materials in the Investor Relations section of our website. Following management’s prepared remarks, we will open the call for a question and answer session. With that, I would now like to introduce Andy. Please go ahead.

Thank you, Scott, and good afternoon, everyone. We appreciate you joining us

Andy Rubinstein, Chief Executive Officer, Xcel Entertainment: today. In the twenty twenty five second quarter, Xcel generated record quarterly revenue and adjusted EBITDA of 336,000,053 million dollars respectively. We continue to build on our leading position in delivering the best gaming experience to The US locals market as we support more than 27,000 legal and regulated gaming terminals at over 4,400 retail partners across 10 states. Across our broader portfolio, we generated growth in the majority of the markets where we operate. Our q two growth reflects our disciplined expansion strategy and consistent execution in our core developing and new markets.

Xcel’s continued growth will benefit from its strong competitive position and healthy balance sheet as we pursue our multi pronged growth strategy. Today’s call should leave everyone with the understanding that local gaming is an incredibly attractive, resilient, and a growing segment within the broader gaming market. And as a leader in this segment, Xcel expects to continue to generate near and long term growth in revenue, adjusted EBITDA, and free cash flow. We plan to achieve these goals by leveraging our operating expertise while also remaining focused on often overlooked m and a opportunities, which I will discuss in more detail later on the call. As the market leader in Illinois, this market remains the foundation of our business with second quarter revenue up over 8% to a quarterly record $245,000,000.

This increase was driven by our strategic game enhancements and location optimization initiatives, which resulted in a 6% year over year increase in location hold per day to 910. Our second largest core market, the Montana distributed gaming route, grew revenue by 2.6% as it continues to scale its content and systems products to support its dominant market share. Our developing markets, Nebraska and Georgia, grew revenue by 26.153.5% respectively, while Nevada revenue declined by 7.7%. As Nebraska and Georgia continue to take market share with superior service and products, Nevada’s decline reflects the loss of a key customer in 2024 due to a change in ownership. We remain optimistic about our growth potential in all three markets where strategic investments are now beginning to contribute to Excel’s overall growing adjusted EBITDA.

In our new markets, we are seeing tangible contributions from our Toucan Gaming acquisition in Louisiana. That acquisition further expanded our operations in the Southeast by adding over 600 terminals across nearly 100 locations. Toucan Gaming generated approximately $10,000,000 of second quarter revenue, and we expect to realize additional synergies and revenue as well as adjusted EBITDA performance gains. Our performance reinforces our confidence that these benefits will become even more apparent into next year. In April, Xcel’s installation of 271 gaming positions completed phase one of its casino at Fairmont Park.

Our soft opening just prior to the Kentucky Derby generated a strong turnout, bringing excitement to this historic venue. Fairmont continues to ramp up steadily, and we remain confident in its long term contribution. We expect our player acquisition and retention strategy to expand our player database and drive market share gains. In addition to our racing and casino business at Fairmont, Xcel benefits from a long term revenue sharing agreement tied to FanDuel’s online sports betting operations across the state of Illinois. When taken together, the early operational progress at Fairmont and the FanDuel revenue sharing arrangement reinforce our confidence that Fairmont Park Casino and Racing will continue to contribute to our adjusted EBITDA growth as we move into 2026.

Looking ahead, our m and a pipeline remains active. We continue to evaluate opportunities across the large and fragmented local gaming market estimated at over $15,000,000,000 nationally. We remain focused on disciplined, accretive transactions that do not stretch our balance sheet. Most of these assets are below the radar of larger operators, creating attractive opportunities for Xcel to expand our footprint while maintaining strong financial discipline. Our consistently strong financial performance and ongoing progress reflect the inherent resilience of our business model and its ability to generate compelling returns on invested capital.

Our decentralized approach spanning thousands of retail locations provides the diversification and the flexibility to efficiently allocate capital in line with local demand and market dynamics. With that, I’m gonna turn it over to Marks to walk us through the financial results in added detail.

Scott Levin, Investor Relations, Xcel Entertainment: Thanks, Andy. For second quarter, total revenue was $336,000,000 representing year over year growth of 9%. Without the acquisition of Fairmont Park and our Louisiana assets, total revenue was 317,000,000 representing year over year growth of 2.4%. Adjusted EBITDA for the second quarter was $53,000,000 a year over year increase of 7% compared to second quarter twenty twenty four. As of 06/30/2025, we operated approximately 27,400 terminals across more than 4,400 locations, representing year over year increases of three point four percent and three point one percent, respectively.

As Andy stated earlier, we look at our distributed gaming portfolio across three markets, core, developing, and new. Each of these markets is positioned to grow revenue and earnings at different rates for different reasons. Our core markets, Illinois and Montana, are our largest and most seasoned markets, we expect them to scale their platforms to drive higher margins and free cash flow over time. Our developing markets in Nebraska, Nevada, and Georgia are fast growing markets where we expect our prior infrastructure investments and scale to generate meaningful increases in revenue and operating margin. We expect that our new markets of Louisiana and Fairmont Park will experience revenue growth while initially generating lower margins as we invest in our operating platforms.

I also wanted to provide more revenue detail on our two core markets, Illinois and Montana. The Illinois distributed gaming market contributed $236,000,000 of revenue, which grew by 9,000,000 or 3.9% in second quarter two thousand twenty five compared to prior year. Our Montana distributed gaming route experienced positive quarterly revenue growth of 2.6%, while GrandVision Gaming, Excel’s wholly owned slot machine manufacturer, saw a decline in revenue primarily due to timing on software sales as GrandVision Gaming or GVG updates its operating platform to support product availability that excels other markets. GVG, our Billings Montana based slot manufacturer, and Century, which runs our distributed gaming route, are reported together under Montana consolidated operations. As a result, the year over year quarterly revenue showed the decline for Montana on a consolidated basis.

As we mentioned earlier, Nevada experienced a revenue drop from the loss of the key customer due to an ownership change. In spite of that loss, we have done a great job optimizing our operating footprint in Nevada in the second quarter. I also wanted to address our recent operational wins, which include Illinois increased operating margins by 70 basis points in the second quarter two thousand twenty five as the team scaled our existing infrastructure. Illinois launched ticket in, ticket out, Tito late in July with a phased rollout expected over the next few months and a full implementation date to be determined. We believe Tito has the potential to provide a better player experience, lower field cash needs, and potentially lower our operating expenses.

Montana rolled out proprietary gaming content and gaming systems designed to increase average profitability per store. Both Nebraska and Georgia utilized attractive redemption products and gaming infrastructure to profitably increase market share. Finally, Louisiana legislation passed that allows for an additional video gaming machine per route location as well as additional video gaming machines to truck stops. As a reminder, our route markets are bifurcated between negotiated and legally defined revenue splits with retail and state government partners. Only our Illinois, Georgia, and Pennsylvania markets have legally defined revenue splits, which are determined statutorily.

The rest of our markets have revenue splits which are negotiated between locations in Excel. For competitive reasons, we do not disclose the operating margins in these states and their implied gross margins, both of which are driven by revenue splits. Moving on to capital expenditures. For the second quarter, our CapEx totaled approximately $26,000,000 We are reaffirming our full year 2025 CapEx forecast of $75,000,000 to $80,000,000 including approximately 39,000,000 to $41,000,000 for our legacy markets, 5,000,000 to $7,000,000 for Louisiana, and 31,000,000 to $32,000,000 for Fairmont Park. CapEx for Fairmont Park covers both phase one, which is now complete, and our initial investments in phase two planning.

Following the completion of these projects, we expect normalized annual CapEx to return to the 40,000,000 to $45,000,000 range. At quarter end, we had approximately $331,000,000 of net debt and $392,000,000 of liquidity, consisting of $265,000,000 of cash and $127,000,000 of availability under our credit facility. Lastly, we remain committed to returning capital to our shareholders. During the second quarter, we repurchased 634,000 shares at an average price of $10.58 per share for a total of $6,700,000. This brings the total shares repurchased for the six months ended June shares at a total of $16,900,000.

With a strong balance sheet and low leverage, we believe we are well positioned to continue to grow our business and return capital to shareholders. With that, I’d like to turn it back over to Andy.

Andy Rubinstein, Chief Executive Officer, Xcel Entertainment: Thanks, Mark. As I mentioned earlier, we are pleased with the direction of the business, including our record quarterly revenue and record quarterly adjusted EBITDA. Local gaming remains an attractive, resilient, and growing market segment with large untapped potential, which presents Xcel with multiple opportunities to continue to generate strong and consistent revenue, adjusted EBITDA, and free cash flow growth moving forward. With that, I now would like to open the call to questions. Operator?

Jason, Moderator: Our first question is from Chad Beynon with Macquarie. Your line is now open.

Chad Beynon, Analyst, Macquarie: Hi. Good afternoon, Andy and Mark. Thanks for taking my question. Wanted to start with the strong growth that you showed in Illinois since it’s the biggest market and you’re categorizing it as a core market, can you just talk about what you saw throughout the quarter? We’ve heard from a number of other gaming companies who’ve said that the quarter started off certainly differently than it finished, given all the volatility in the market.

But I was just wondering if you could give a little bit more detail in terms of how the quarter shaped out given some consumer volatility? Thank you.

Scott Levin, Investor Relations, Xcel Entertainment: Hey, Chad, it’s Mark. Thanks for the question. It was actually pretty consistent growth through the quarter. All three months generally were kind of consistent with the volume. So we didn’t really see much of a peak or valley, which is generally consistent.

Chad Beynon, Analyst, Macquarie: Okay, great. Thank you. And then, Andy, just on your comments around M and A, I know you introduced the idea in a larger way, probably about a year ago with the Fairmont acquisition. What size asset portfolio EBITDA should we think about that you and the team will be looking at? Or maybe asked a different way, how much leverage are you willing to put on this business at this point given your cash and facility availability at this point?

Thank you.

Andy Rubinstein, Chief Executive Officer, Xcel Entertainment: Thanks, Ed. As we look at it, we’re always opportunistic on the acquisitions. But I would tell you, consistent with our history, we’re not looking to lever up the company in any extreme way. We’ve always kind of played it relatively conservatively. We have plenty of availability in our credit facility as we’re about to refresh that.

And obviously, the company generates significant cash flow. So as we move forward, we’re evaluating opportunities to best deploy that cash. And like the recent opportunities that we saw both at Fairmont and in Louisiana, we take advantage of those opportunities. So I would expect that we would be consistent in looking where the opportunities are adjacent or actually involved with the markets that we’re in. And we look to continue to grow with those different opportunities.

Scott Levin, Investor Relations, Xcel Entertainment: Hey, Chad, this is Mark too. I would just point out that the local gaming market which we think we’re a premier player in, generally are smaller assets in that these are unconsolidated sort of less professional operators. So it tends lean where the opportunities are smaller and you can take more bite sized acquisitions.

Chad Beynon, Analyst, Macquarie: Okay. And I would presume with some of those, there’s opportunities to improve the margins or improve something with the business that that you have the the business acumen to implement.

Andy Rubinstein, Chief Executive Officer, Xcel Entertainment: Yeah. I I think, in general, we have a competitive advantage in the fact that we have scale. We have the ability to implement technology from the GrandVision operations that we have. We operate systems, reward systems in both Montana, Nevada and then Nebraska. We have the ability to manufacture equipment.

So as we look at a market, we can take a more holistic view and we believe that it’s allowed us to, to be much more competitive and much more aggressive as we approach these opportunities.

Chad Beynon, Analyst, Macquarie: Appreciate it. Thank you, boss.

Andy Rubinstein, Chief Executive Officer, Xcel Entertainment: Thanks, guys. Thank you.

Jason, Moderator: Our next question is from Steve Bezella with Deutsche Bank. Your line is now open.

Steve Bezella, Analyst, Deutsche Bank: Hey, good afternoon and thank you for taking our questions. First, you noted Tito and Illinois started in July. What are your expectations for how that can impact earnings moving forward?

Andy Rubinstein, Chief Executive Officer, Xcel Entertainment: Thanks. Thanks, Steve. It’s Andy. As we look at Tito, it’s really, really early in the game because over half of the machines have not had Tito kind of implemented. And we’re waiting for the IGB as they’re rolling it out.

So we’re really early. We’re like literally weeks into it. I think it’s our second week. This quarter, we don’t expect anything material and we’ll be able to by the time we report the third quarter, kind of give you a little more indication of what impact it will have on the market. We do think it will help with our reduce the cash that we have as people utilize their tickets in multiple machines that aren’t continually cashing out, the player experience will be better and it should mildly reduce the collection costs.

So we’re watching it closely and we’ll see more to report after this quarter.

Steve Bezella, Analyst, Deutsche Bank: Okay. Thanks. And then in Nevada, I think you noticed the loss of a key customer. What is the market growing ex the one customer? And have you seen any changes in the market to start the third quarter at all?

Scott Levin, Investor Relations, Xcel Entertainment: Yes, Steve, it’s Mark. So net of that customer, we actually grew slightly in revenue year over year. And in terms of the market there, it’s really bifurcated kind of in sort of locations that have licenses and locations that don’t and instead pay leases. We’re much more aggressive about the former in terms of getting higher margins. And we saw that from our team there, they performed significantly better in terms of margin even without the one key customer.

And so we like that market a lot actually and we’re growing and that’s why we’ve kind of included it in our developing markets even though it’s a market that’s been around thirty plus years.

Steve Bezella, Analyst, Deutsche Bank: Okay, great. Thank you.

Jason, Moderator: Our next question is from Greg Kibis with Northland. Your line is now open.

Greg Kibis, Analyst, Northland: Hey, good afternoon, Andy, Mark. Thanks for taking the questions. Congrats on the record results. Wanted to just ask maybe how performance at the racetrack and casino has performed relative to your initial expectations and maybe what your updated expectations are for Fairmount this year following Phase one completion and launch?

Scott Levin, Investor Relations, Xcel Entertainment: Yes. Hey, Greg, it’s Mark. So we’re not going to break out operating segments, but we underwrote the park as sort of a valuable asset for a variety of reasons. And we’ve some have to do with casino racing and sports book and then F and B, food and beverage. And we’ve seen positive indicators for all four that kind of matched our internal expectations.

So we’re pretty excited about the asset. It’s still very early days. It’s thirteenth week. But we will I think we commented that we think it’s going to be a significant contributor in 2026 and we still feel pretty confident about that.

Greg Kibis, Analyst, Northland: Great. And I guess a follow-up there. When do you expect to have maybe a more material update on Phase two timing given that you are spending CapEx this year on Phase two planning? And maybe what more specifically is that kind of spending going towards or allocated for?

Scott Levin, Investor Relations, Xcel Entertainment: So the second part of the question, Greg, is really just design. And so you have to kind of understand the asset, and we invite all of you to come out and view it sometime. But it’s 183 acre campus with multiple different buildings. And one of the things you really need to understand in order to be successful in the phase two is how people interact between those buildings. We’re still really figuring that out.

We’ve learned a lot in the last thirteen weeks and we think we’ll learn a lot more. The racing season ends at the October. So we’re kind of like TBD on exactly what we’re going to do for phase two. We also have to work with the Illinois Gaming Board in order to meet their timeline. So there’s a lot that goes into it, but trying to be very thoughtful about it and be extremely good stewards of capital.

Greg Kibis, Analyst, Northland: Got it. Appreciate that. And I guess lastly, could you just remind us of the timing of that key customer in Nevada just so we think about year over year comps?

Scott Levin, Investor Relations, Xcel Entertainment: Yes. It was kind of end of Q3, when I left of ’24, sorry.

Greg Kibis, Analyst, Northland: Got it. Thanks very much. Yes. Thank you.

Jason, Moderator: It looks like there are no more questions. So I’ll pass the call back over to the management team for closing remarks.

Andy Rubinstein, Chief Executive Officer, Xcel Entertainment: Thank you. At Xcel, we’re staying focused, we’re executing well and we remain confident in our long term strategy. I want everybody to enjoy the rest of the summer and we look forward to sharing our continued progress when we report results again this fall. Thank you for joining us.

Jason, Moderator: That concludes the conference call. Thank you for your participation. Enjoy the rest of your day.

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