Accel Entertainment, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Welcome to Accel Entertainment second quarter 2026 earnings call. Participating on the call today are Andy Rubenstein, Accel's Founder, Chairman of the Board, and current Chief Executive Officer. Mark Phelan, Accel's President, who is transitioning to Chief Executive Officer later this week, and Brett Sommer, Accel's Chief Financial Officer. 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 statement 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.

Accel delivered another strong quarter. Revenue increased 10% year-over-year to $368 million, an all-time quarterly record. While net income was $13 million, compared to $7 million in the prior year period. Adjusted EBITDA increased 11% to $59 million, also an all-time quarterly record. We 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. We believe these strong results reflect the durability of our distributed gaming model, the strength and ongoing growth of our largest market, and growing contributions from our developing markets. More importantly, they reflect another quarter of thoughtful execution across the business and the success of the strategy we've been following for several years, which has positioned us as an industry leader in distributed gaming. Turning to our markets. Illinois remains the foundation of our business and delivered another impressive quarter.

Revenue from our Illinois distributed gaming operations, excluding Fairmount Park, increased 6% year-over-year, driven by sustained improvement in hold per day and a high-performing customer mix, with average location hold per day increasing 9% year-over-year to $992. Importantly, those results were achieved while both our location count and our terminal count declined modestly in Illinois. That is precisely the outcome our strategy is designed to produce. We are not managing this business to maximize machine count. We're managing it to maximize revenue and profitability per location, and our results reflect that. At Fairmount Park, the investment thesis is playing out as expected. Customer engagement continues to ramp, and the property delivered its highest quarterly gross profit since we acquired it, which represents 33% growth compared to the second quarter of last year.

Table games and slots continue to gain traction, and our second racing season is underway. We remain committed to developing a permanent casino at the property, and our planning around the scope and timing of that investment continues to advance. We plan to provide additional details on this exciting development over the next quarter or two. Chicago remains one of our most significant near-term growth opportunities, and I want to provide an update on where things stand. Beginning in June, the Illinois Gaming Board issued the first establishment licenses for video gaming locations in the city of Chicago, followed by a second round in July. Accel has already been approved for 17 of the 39, or approximately 44%, of establishments licensed in the city, reaffirming our position as the statewide market leader. The next step is with the City of Chicago itself.

The city's Department of Business Affairs and Consumer Protection has now begun accepting and processing applications for city video gaming licenses. Once a location receives its city license, the gaming board permits the terminal operator to connect to the state's central communication systems and go live. There have been some delays along the way, but based on where the process stands today, we expect the first Chicago establishments could begin operating in the coming weeks. What hasn't changed is our conviction that when this market opens, Accel is well-positioned to move quickly. We already have the infrastructure, equipment, operational expertise, and long-standing local relationships necessary to capitalize on what we believe will be a meaningful opportunity. Outside of Illinois, we continue to build momentum in our developing markets.

Nebraska and Georgia both delivered exceptional double-digit revenue growth and are becoming meaningful drivers of Accel's overall earnings growth, not simply contributors to revenue growth. Elsewhere across our footprint, in Louisiana, we completed the acquisition of Rice Palace Truck Stop Casino during the quarter, and our pipeline remains active and attractive. In Nevada, last month, we announced a new route agreement with Green Valley Grocery. This extends our relationship with Anabi Oil, adding approximately 600 terminals across Southern Nevada, further expanding the platform we established earlier this year through our Rebel partnership. With Green Valley and Rebel, we have over 1,000 terminals with Anabi Oil and are excited to continue our partnership with them. During the second quarter, we continued to execute our disciplined capital allocation strategy.

We repurchased approximately 500,000 shares for $5.6 million, while ending the quarter with approximately $255 million of cash and net debt of approximately $318 million, representing net leverage of approximately 1.4 times. At the same time, our $300 million revolving credit facility remains fully undrawn. We believe the strength of our balance sheet gives us the flexibility to continue investing organically, pursue disciplined acquisitions, and return capital to shareholders while maintaining a solid financial profile. As a reminder, when looking at the broader macroeconomic environment, our business is fundamentally hyper-local. Our customers visit neighborhood bars, restaurants, truck stops, and convenience stores as part of their everyday routines, and that behavior has proven resilient across a variety of economic environments. Finally, I'd like to say a few words about our leadership transition. This will be my final quarterly earnings call as Chief Executive Officer.

Later this week, on August 7th, Mark will become CEO while I continue on as Chairman. We also recently promoted Stan Guidroz to Chief Operating Officer. Stan built Toucan into one of the premier operators in Louisiana, and he brings that same operational discipline, focus on growth and leadership to our broader organization. I am very confident in the strength of our leadership team and the future of this company. I believe Accel is strongly positioned for its next chapter, and I look forward to continuing to work alongside Mark, Stan, Brett, Scott, and the rest of our leadership team as Chairman. With that, I'll turn it over to Mark.

Thank you, Andy. From an operational standpoint, the second quarter reflects the success of our priorities, improving route quality over route size, deploying capital where it generates the highest returns, and delivering a better experience for both our players and our location partners. That approach is producing excellent financial operating results. I'll begin with Illinois, which remains the cornerstone of our distributed gaming business. Consistent with our location quality optimization strategy, during the quarter, our Illinois average location hold per day increased 9% to $992 per location. The improvement reflects both a stronger portfolio mix and better productivity across the route. We have not disclosed an exact split between those two factors. The locations we added are generally higher performing, while many of the locations that came off the route were lower volume, unprofitable, or locations that closed independently.