Accel Entertainment Inc - Ordinary Shares - Class A1 Aktie

Hello, everyone. Thank you for joining us, and welcome to Accel Entertainment's Q1 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Scott Levin.

Welcome to Accel Entertainment's first quarter 2026 earnings call. Participating on the call today are Andy Rubenstein, Accel's Chief Executive Officer; Brett Summerer, Accel's Chief Financial Officer; and Mark Phelan, Accel's President and Chief Operating 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 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 forecast 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 Entertainment delivered a strong start to 2026 with the company's highest ever Q1 adjusted EBITDA result. First quarter revenue increased 9% year-over-year to $352 million, marking an all-time quarterly record for the company. Adjusted EBITDA also grew 9% to $54 million, reflecting solid underlying performance across the business. These results reflected the continued strength of our distributed gaming model, ongoing momentum in our developing markets and our team's disciplined execution across each of our businesses. We ended the quarter operating 4,540 locations and 28,353 gaming terminals nationwide, representing year-over-year increases of 3% and 4%, respectively.

Turning to our core markets. Illinois remains the foundation of our business and continue to deliver strong results in the first quarter. Total Illinois revenue, excluding Fairmount Park, increased 6% year-over-year to $242 million. Our distributed gaming operations in the state continue to benefit from strategic location optimization and new machine placements with total average location hold per day increasing 9% year-over-year to $962.

This performance underscores the effectiveness of our ongoing strategy to improve route quality and concentrate investment in higher-yielding placements even as we maintain broadly flat VGT counts in this mature market. Our rollout of ticket-in ticket-out technology in Illinois, or more commonly referred to as TITO, continues to progress well. With all of our terminals now TITO-enabled, we are beginning to realize the benefit of TITO, and we expect that benefit to build through the remainder of 2026 as players become accustomed to the convenience of TITO.

Chicago represents one of the most exciting near-term growth opportunities we have seen in some time. The Illinois Gaming Board is actively processing applications from Chicago establishments as we continue signing up locations while waiting for final regulatory approvals. As the market leader in Illinois with 2,678 locations and 15,413 gaming terminals and an established platform of infrastructure, people and relationships, we believe we are uniquely positioned to move quickly and efficiently when the market opens. We currently anticipate the first Chicago locations could go live in late 2026 or in the first quarter of 2027. We will continue to provide updates as the process unfolds.

Montana delivered steady performance in the first quarter with total average location hold per day increasing 5% year-over-year. In addition, our Grand Vision Gaming subsidiary continues to develop exciting and engaging new content that enhances margins through exclusivity, while supporting our broader business. Across our developing markets, we continue to build momentum. Nebraska delivered outstanding results with revenue increasing 57% year-over-year and total average location hold per day up 57%, supported by new machine placements. We continue to see the benefit of our operating leverage with the business growth and market density.

Georgia also delivered strong growth with revenue up 43% year-over-year and total average location hold per day up 14%. In Nevada, we grew locations 27% and terminals 28% year-over-year, reflecting the significant footprint expansion from the Dynasty Games acquisition and our new route partnership with Rebel Convenience Stores. Mark will discuss Nevada in more detail shortly.

Louisiana continued to grow with revenue up 12% year-over-year and our bolt-on acquisition pipeline remains active and attractive. At Fairmount Park Casino & Racing, we are excited to have launched live dealer table games last month, including Blackjack, Roulette and Novelty Games, marking a significant step in Fairmount's evolution into a full-scale gaming and entertainment destination. Reflecting our continued confidence in the long-term value of Accel shares and our commitment to returning capital to shareholders, we repurchased approximately 1.1 million shares of our common stock for $12 million in the first quarter of 2026.

Our balance sheet remained strong with $274 million in cash and net debt of approximately $306 million, representing net leverage of approximately 1.4x. Our $300 million revolving credit facility remains fully undrawn, providing significant financial flexibility as we continue to evaluate organic growth, tuck-in acquisitions and capital return opportunities.

I want to take a moment to address the broader macroeconomic environment and the resilience of our business model. We are operating in a period of heightened uncertainty brought on by tariffs, inflation and geopolitical instability. I want to be clear about why we believe Accel is well positioned in this environment. Our business is fundamentally hyperlocal. We operate gaming terminals in neighborhood bars, restaurants, convenience stores and truck stops, the kinds of places people visit in their daily lives.

Our customers are local players engaging in local entertainment, and that behavior has proven remarkably resilient across economic cycles. We also believe the current environment may be driving incremental trade-down activity toward local, convenient and affordable entertainment options. This is exactly the kind of experience our location partners provide and which we view as a stabilizing tailwind for our business.

Our cost to serve allows us to flex, which means we have the ability to manage our business efficiently even in periods of softer consumer demand. Tax refund season provided its typical seasonal tailwind as we move through the quarter, and we continue to monitor the broader consumer environment for any signs of impact on player activity. Continuing through the beginning of the second quarter to date, we have not observed any material impact to our business. On the contrary, volumes remain strong, and we believe our distributed, local and community-rooted business model represents one of the most resilient profiles in the gaming space.

Lastly, before I turn the call over to Mark, I want to briefly touch on our leadership transition. As we announced in February, I've stepped into the Chairman role and Mark will assume the Chief Executive Officer role effective August 7 of this year. I'm incredibly proud of what this team has built over the past 17 years, and I have full confidence in Mark and the entire Accel leadership team to continue to grow this business and capitalize on the significant opportunities ahead.

With that, I will turn the call over to Mark to review our operations in more detail.

Thank you, Andy. From an operational standpoint, Q1 2026 reflected continued disciplined execution across each of our markets with a focus on route quality, hold per day improvement and targeted growth investment. In Illinois, our team remained focused on improving location mix, redeploying underperforming assets and deploying capital into higher-yielding machine placements. Illinois location count declined modestly year-over-year as we continued our deliberate strategy of optimizing the route rather than growing for the sake of location count. The result of that strategy is clear in our hold per day performance. Illinois location hold per day increased 9% year-over-year to $962 per location, which is a strong result and reflective of the quality improvements we have made across the route over the past several years.

In Chicago, our team has been actively preparing for the market opening. We've been working closely with city leadership to support the development of best practices and efficient regulatory framework. We have begun signing up Chicago locations and are well positioned to mobilize quickly when the Illinois Gaming Board begins issuing approvals.

In Nevada, our focus in Q1 2026 was integration and building out our newly expanded footprint. As a reminder, we completed the acquisition of Dynasty Games in December of 2025, adding 20 locations and approximately 120 gaming terminals across Northern Nevada. We also launched our route partnership with Rebel Convenience Stores in January of 2026, adding 55 locations and over 400 gaming machines across Southern Nevada. That rollout was executed efficiently. Our team has been working to elevate the gaming experience of these Rebel locations with new machines and proprietary content, and we are encouraged by the early increases in play we are seeing. We expect those trends to continue building through the back half of the year. We now operate in Nevada across 450 locations and 3,348 gaming terminals, representing a market we continue to be excited about for the long term.

In Nebraska, the team delivered exceptional results. Revenue was up 57% year-over-year, driven by new machine placements featuring our proprietary content and ongoing investment in the market. As our terminal density increases in Nebraska, we continue to see strong operating leverage. In Georgia, we continue to expand our footprint with locations up 28%, terminals up 35% year-over-year. Hold per day grew 14% year-over-year, reflecting Accel's continued development of this market.

In Louisiana, we continue to execute our bolt-on acquisition strategy. The pipeline of opportunities remains active. Sellers' price expectations have become more favorable, and we believe we remain the buyer of choice in this market given our size and track record of accretive integration. At Fairmount Park, the property continues to evolve. Casino operations remain the primary driver of performance with hold per day continuing steady upward growth. We launched live dealer table games in April of 2026, including Blackjack, Roulette, Ultimate Texas Hold'Em and Baccarat, marking a significant step in Fairmount's evolution into a full-scale gaming and entertainment destination.

Importantly, revenue from these new gaming positions is being reinvested in the racing product. For the 2026 season, we increased total purses by $500,000, which is already attracting larger field sizes and more competitive racing. Our second racing season is now underway, and we are watching customer behavior closely as the season builds. We continue to evaluate the timing and scope of the overall Fairmount investment as we gain more operating experience in the property. In the meantime, we are pleased with its contributions and prospects for further growth for live table games.

Across all of our markets, our operational approach remains consistent, disciplined capital deployment, service excellence at the location level, data-driven decision-making and strong local relationships. That operating discipline is what underpins our financial performance and supports our ability to generate growing free cash flow over time.

Before I turn it over to Brett, I want to share a broader thought on where we see this business heading. When we think about what Accel is building, we increasingly think of it less as a logistics business and more as a gaming and hospitality business. Logistics business competes on efficiency, scale and cost. The gaming and hospitality business competes on experience, content relationships and differentiation, and it commands meaningfully better economics as a result.

Everything we are doing, including new exclusive content in Nebraska and Georgia, table games launch and increased purchase at Fairmount, the TITO rollout that improves the player experience in Illinois, the quality upgrades at our Rebel locations in Nevada, all of it is oriented around delivering a better, more engaging entertainment experience for our players and a more valuable relationship for our location partners. That is a key driver of our next phase of margin expansion and profitability growth at Accel, and it is what gets me most excited as I prepare to step into the CEO role later this year.

With that, I will turn the call over to Brett to review the financial results in greater detail.

Thank you, Mark, and good afternoon, everyone. I'll begin with our first quarter results and then provide additional detail on cash flow, the balance sheet and capital allocation.

As Andy mentioned, for the first quarter, total revenue increased 9% year-over-year to $352 million, an all-time quarterly record for Accel. Growth was broad-based with strength in Illinois, Nebraska, Georgia, Nevada and Louisiana. Net gaming revenue increased 10% year-over-year to $331 million, which was the primary driver of our top line performance. Operating income for the quarter was $27 million compared to $26 million in the prior year period. Net income was $15 million, essentially flat year-over-year as higher operating income was offset by higher depreciation and amortization associated with our growing asset base and also the timing of our purse expense, as I'll discuss later.

On a per share basis, diluted EPS was $0.17 for both Q1 2026 and 2025. Adjusted EBITDA for the first quarter was $54 million, an increase of 9% compared to the prior year period. Our underlying operating performance was solid and growth was essentially in line with our strong revenue performance. It's important to note that adjusted EBITDA and net income were impacted by the timing of our purse expense accrual in Fairmount Park. This was a $2 million shift in the timing of how our Fairmount Park purse expense accrual is recorded.

In 2025, our first year of racing operations, purse expense was recognized as races were conducted, which concentrated expense in Q2 and Q3. In 2026, we determined it was more appropriate to accrue this expense in line with revenue recognition as revenues were generated throughout the year and contribute to annual purse obligation. As a result, expense is now being recognized early in the year and more evenly across periods. This change impacts the timing of expense recognition by quarter, but does not impact full year results other than the $500,000 strategic increase to the purse that Mark referenced earlier. Excluding this item, adjusted EBITDA and net income would have been approximately $2 million and $1.5 million higher, respectively, to enable easier comparison to prior periods.

Turning to capital expenditures. Total CapEx in the first quarter was $23 million, down from $27 million in the prior year period. We continued to expect full year 2026 CapEx to be in the range of $60 million to $70 million, which compares to approximately $89 million in 2025, which included elevated investment at Fairmount Park. The majority of our 2026 CapEx is maintenance-oriented with growth capital concentrated in our developing markets. It's worth noting that our maintenance capital spending is not like other companies. There is an incremental return on this investment with a reasonable payback.

From a cash flow perspective, operating cash flow for the quarter was $43 million. We used approximately $23 million in investing activities, primarily for CapEx and $42 million in financing activities, reflecting debt repayment, share repurchases and other items. I also want to highlight free cash flow as a metric we intend to discuss more regularly going forward as we believe it best reflects the underlying cash generation strength of our business.

We define free cash flow as net cash provided by operating activities less CapEx, net of PP&E disposals. With CapEx normalizing in 2026 and our developing markets scaling profitably, we expect free cash flow to continue to grow and view this as a key priority. Given our adjusted EBITDA of $54 million and our free cash flow of $20 million, we have a cash conversion of 38%.

Moving to the balance sheet and liquidity. We ended the quarter with $274 million in cash and cash equivalents. Total debt net of debt issuance cost was $581 million, resulting in net debt of approximately $306 million and net leverage of approximately 1.4x on a trailing 12-month adjusted EBITDA basis. Our $300 million revolving credit facility remains fully available. We entered into a new interest rate collar on January 30, 2026, which replaced our prior interest rate capital arrangement. The collar establishes a cap rate of 4% and a floor of 2.92% on our term loan and matures in September of 2029. This instrument is designed to provide continued protection against interest rate volatility while optimizing our cost of capital.

As of March 31, 2026, we repurchased a total of 18.7 million shares under our share repurchase program that began in November of 2021 at a total purchase price of approximately $195.6 million, leaving approximately $151.2 million remaining under the current program authorization. Our Board has historically been thoughtful about the share repurchase program authorization, and we will evaluate next steps in the context of our broader capital allocation priorities.

Our capital allocation framework remains disciplined and return focused. We continue to evaluate each dollar of capital across our organic investment, bolt-on and strategic acquisitions, debt reduction and share repurchases, always with an eye towards generating the highest risk-adjusted return for our shareholders. Looking ahead, our recurring revenue model, disciplined capital deployment and continued operating leverage position us well to convert earnings into free cash flow and fund our growth initiatives while maintaining a strong balance sheet. We remain confident in our ability to continue delivering on our financial commitments in 2026 and beyond.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Patrick Keough with Truist Securities.

Sorry, am I echoing?

I don't hear an echo on our side.

Okay, great. Apologies. So early days with TITO obviously in Illinois, but could you give any color on early player adoption metrics and any impact you're seeing on cash handling costs thus far?

Yes, sure. So a couple of different things to kind of just set the table. When we initially thought about TITO and what it can mean for us, we had some internal estimates. And we've talked a little bit about it in the past, potentially up to around that 20% mark. What we're seeing so far in adoption is around 13% and it's not fully tapered off yet. So there's still potentially upside there.

If we think about what it can mean for us, it's -- I wish it was a simple answer. As you can probably appreciate, our overall play is increasing. And because our overall play increases, the amount of cash that's out there on the street is higher for us to go pick up. So that actually drives additional costs, but it has nothing to do with TITO.

On the flip side of that, TITO is helping us reduce that. But it's happening organically. As you probably can appreciate, we do our cash routes and pickups and all of that on a weekly basis. And we have some automation behind it. But ultimately, it comes down to humans and our practices that we have throughout the organization. And so some of that cash as it's getting to certain collection levels, we're picking it up and taking off the street. So it's not like a one-time -- and there's some other factors involved, too. But ultimately, it's not like a one-time cash benefit or cost reduction that we're going to see. It will be something that plays out over time.

And again, I just would caution, we're only getting to this kind of double-digit percentage here in the last few months. So it still has a little bit of time to play out. And if you think about the adoption rate within the business, we only got to 100% fully TITO-enabled a handful of weeks ago as well. So again, more to come on that, but it's just a piece of the overall picture. And I think teasing it out is going to be difficult, but you should overall see a little bit of a benefit in terms of additional cash in our banks as well as our cost structure.

Okay, understood. That's very helpful. And for my follow-up, the JCAR recently approved the Illinois Gaming Control Board's vertical integration rules. From your perspective, could you talk a bit about what this entails and if you see yourself as a beneficiary as these are enforced?

Patrick, this is Andy. Although that rule was passed by JCAR, it has recently been contested by some of the operators in circuit court. So we're going to wait to see how that plays out before we draw any conclusions.

Your next question comes from the line of Steve Pizzella with Deutsche Bank.

Maybe we can start with some of the recent trends. It looks like from the data we can see out of the IGB, January and February were very strong, then slowed down a little bit, March was still solid. What did you see in terms of April? I know, Andy, you mentioned the potential benefits from a trade-down effect and tax refunds potentially maybe offset by some gas prices. And then I guess just on that latter point, as you think -- as you look at your history, to what extent has your customer base been sensitive to gas prices?

Thank you. From our perspective, we really haven't seen any noticeable impact from the gas prices yet. Historically, it hasn't been a major factor, and I'm speaking mostly from the Illinois market, our players actually need to travel less to reach our establishments as opposed to going to a regional casino. So we tend to benefit when the player wants to stay closer to home. So whether it's going to impact their overall budget for entertainment spending, we're unsure, but we do know that they'll be spending less on gas to come play in our establishments. So we may get a benefit where they'll elect to play with us even though they have less dollars in their total budget.

Your next question comes from the line of Jordan Bender with Citizens.

Maybe to start with the pruning in Illinois, another quarter which you took out a good amount of locations and units. Can you maybe just update us on where we stand there? And then I guess also related to that, are the units or locations that you're going to take out today or going forward, will those have less of an impact versus maybe some of the low-hanging fruit that we saw over the last 2 years?

Jordan, it's Mark. Strategy on that pruning is really just opportunistic. When we see opportunities to reduce locations that actually burn our cash, we tend to do it. And I don't think there's particularly low-hanging fruit that's still not there. We're always mindful of that, and we're also mindful of our organic revenue that's coming online. So it's a balance between new revenue and then revenue that's actually costing us.

And just to follow-up -- sorry, I'm getting some echo here. And just to follow-up, the plans for the permanent at Fairmount, you kind of said there's nothing to maybe report today. I think the original expectations were maybe there would be some sort of plan first half of '26. Is there some sort of time frame or plan of when we would might be able to hear more about something definite there?

So we're still in the sort of maturation stage of the temporary. We -- as Andy mentioned, we rolled out table games about a month ago, and we just had over 700 people at the Derby Day on Saturday. But it's something we're still contemplating and trying to figure out what the optimal size looks like. So when we do figure it out, we'll obviously let everyone know.

Your next question comes from the line of Chad Beynon with Macquarie Capital.

I wanted to ask about legislative momentum or just any traction that we saw in the first quarter. I know there was a bill in Virginia that was vetoed by the governor. But wondering if you could talk about all states so far this year where we've seen some progress where there could be changes in '27 or beyond.

Chad, it's Mark. Unfortunately, again, this is all us handicapping, but it appears that there's not going to be a lot of legislation that progresses legalization of video gaming terminals or skill games in the United States. You mentioned Virginia, the governor did veto that. There is some life still left in that bill, but its life is slowly eking out as time moves on. So we're not particularly optimistic about any sort of legislative movement in 2026.

Okay. Turning to Nevada opportunities. Great to see the unit growth sequentially and year-over-year as a result of the 2 items that you talked about. When you think about more acquisitions just from -- just a quantitative standpoint, is Nevada still the biggest growth market or are some of these emerging markets just becoming bigger in terms of the absolute impact to the Accel model?

Yes. So Nevada actually, those are opportunistic sort of model changes where we're doing space leases instead of revenue shares with participation bars. But in terms of our individual markets, we're optimistic about all of them in terms of acquisitions. We've talked a bit about Louisiana. It's a mature market, but we have a great partner down the state, and we think we can grow that market accretively as well as with significant volume over time. Illinois is always an opportunity to acquire routes at accretive prices. And in most of our other markets, we're always on the lookout. So I'd say all markets are aligned towards growing potentially through acquisitions.

Your next question comes from the line of David Bain with Texas Capital Securities.

I guess just first, based on your observations of the licensing process in Chicago and maybe discussions with city council and your overall distributor experience, how is that process going? Is it kind of at the pace you would expect is a little bit slower? Can you maybe help us with locations maybe blessed before the end of the year and next? Just trying to get an idea as to how we're looking.

David, it's Mark. So we feel good about the Illinois Gaming Board processing applications, but the city has yet to promulgate any rules around DGT gaming. And that is sort of a wild card. We would imagine it would be done in the next, call it, quarter, but that's me just handicapping it.

Okay. And then assuming that begins to ramp, I guess, my secondary question to that would be, I mean, you mentioned Louisiana valuation rationalizing. And with Chad, you spoke to Illinois still being a good M&A market. I mean, are there valuations moving around perhaps in Illinois, maybe going higher as we get closer to Chicago licensing locations or is that kind of steady as you go? I mean, does it make it more of an exciting market heading into that or what do you think about M&A there?

Yes. We're really excited about the market. I would point to our multiple. We're the only public company in this industry. And we're certainly not going to buy anything that's not accretive to us. So you can use that as a benchmark as to what we see in terms of acquisitions and multiples.

Our next question comes from the line of Max Marsh with CBRE.

Maybe to approach gas prices from a different angle, I think it's fairly intuitive that your hyper local customer is resilient to gas prices broadly. But is there or could there be a localized impact on the truck stop part of your business, specifically looking at Louisiana with its higher proportion of truck stops through Toucan?

So the reality of the truck stop business is it's not truckers, is that it's local people that play at the truck stop because it's a more gaming-focused venue than going into a tavern. And so the people who want to play and have a true gaming experience enjoy playing at the truck stops. Louisiana, that's even more in focus because Louisiana truck stops have up to 60 games, and it's really like a small casino. So because they are -- those establishments of those truck stops are in proximity to where these people live, they tend to thrive in environments where people are watching their entertainment dollars because instead of driving a greater distance to a regional casino, which they have throughout Louisiana, they tend to stay closer to home, either in the tavern market or in this case, the truck stop market. So although they may have reduced disposable income, we get a bigger share of their entertainment wallet.

Max, this is Mark. I would just add, as Andy said, truck stops are a bit of a misnomer in terms of who plays there. That's usually local people, not truck drivers. And I would say in Louisiana, they're probably benefiting from the increase in energy prices and natural gas, particularly. So we don't necessarily view that as a vulnerable part of our portfolio.

Yes. And as Mark said, yes, the drilling -- offshore drilling industry is a major source of employment in Louisiana. So those individuals probably have more dollars in their pocket than they do in a normal situation.

Okay, understood. And if we could just touch on EBITDA margins quickly, approaching 16% this quarter when we adjust for Fairmount first expense following a really strong 4Q. Could you take us under the hood on EBITDA margins and how to think about that going forward?

Sure. Obviously, since it's a forward-looking, I can't really talk too much about it. But what I would point you to is the -- 2 things. One, look at the EBITDA margins, obviously, that we've delivered in the past. What you saw last year is that Q4 was a little higher and Q1, 2 and 3 were kind of all in that mid-15s range. So there is some seasonality associated with that, which you can kind of see play out.

The other thing to be thoughtful about or that you can see the specifics on, in our earnings release, we actually have a gross margin table that shares the gross margin within each of our business pieces. And what you can see is in the space of the all other, which we don't disclose the individual components, but the overall movement of the non-regulated markets, you can see that that's increasing. So I think that's the right way to think about where this is going and kind of our performance year-on-year.

Your next question comes from the line of Greg Gibas with Northland Securities.

In terms of capital expenditures, how much was allocated for Fairmount this year out of your $60 million to $70 million outlook? And how much is more maintenance?

Sure. Thanks for the question. So we don't usually talk about the forecast and how we break down the different pieces of it. What I will say is year-over-year, our total capital, the primary piece of lower capital year-on-year is because Fairmount construction is not in there, at least not in a big way like it was last year. So the vast majority of about a 20% decline in capital is because we're investing less into the Fairmount because we have most of the hard structure out of the way. So that's the first piece.

The second question you asked is about maintenance versus growth. So I know I try to beat a dead horse here, but no inflection in Fairmount. But if you think about our growth versus maintenance capital, we also have kind of what I would consider to be non-return maintenance capital, which is like most businesses, in our business, we don't have that. The way that I look at it is growth capital is generally stuff that pays back within a year. It's adding a machine to a place that doesn't have a machine.

The maintenance capital is a return on investment. It depends on the market and the machine and a lot of other factors, but call it somewhere between 2 and 3 years payback, which is still a good project to invest in. And again, that's separate and distinct from fixing the walls when somebody backs a truck into a kind of maintenance capital. So most of our capital this year is in the maintenance bucket. So you're going to get that kind of payback, which is in that different time frame like a 2 to 3 year, but it's still a really good investment, still a very high IRR and well in excess of our WACC.

Okay, great. That's helpful. And as it relates to maybe the tuck-in acquisition strategy, is Louisiana still maybe the top priority relative to other markets? And maybe how does your pipeline of potential opportunities look in that market?

So Louisiana is definitely a focus of ours in terms of M&A. That's always been our thesis there. And the pipeline is good there. So we're excited about that state growing. But as I said earlier, there's other states that also have very accretive acquisition candidates that we're always viewing and reviewing.

We have reached the end of the Q&A session. I will now turn the call back to Andy Rubenstein for closing remarks.

Thank you, operator, and thank you to everyone who joined us today. We entered the remainder of the year with a clear set of priorities. We have a strong balance sheet and what we believe is one of the most compelling near-term growth opportunities in our company's history with the pending launch of the Chicago VGT market.

As always, I want to thank our employees whose dedication execution makes these results possible, our location partners who trust us to help grow their businesses and our shareholders for their continued support and confidence in our team. We all look forward to updating you on our progress when we report again the second quarter results in August. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon. Thank you for attending the Accel Entertainment Fourth Quarter 2025 Earnings Call. I would now like to pass the conference over to your host, Scott Levin. You may proceed.

Welcome to Accel Entertainment's 2025 Fourth Quarter and Full Year Earnings Call. Participating on the call today are Andy Rubenstein, Accel's Chief Executive Officer; Mark Phelan, Accel's Chief Operating Officer and President, U.S. Gaming; and Brett Summerer, 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 in the Investor Relations section of our website under Events and Presentations.

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 those 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 a reconciliation 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 a strong finish to 2025. We closed the year with record financial results, continued operating momentum, new growth opportunities, and an enhanced balance sheet.

In the fourth quarter, total revenue increased 7.5% year-over-year to $341 million, and adjusted EBITDA grew 19% to $56 million, both all-time quarterly highs. For the full year, we also generated records in revenue of over $1.3 billion and adjusted EBITDA of $210 million.

These results reflect the resilience of our distributed gaming model, growth from our new acquisitions, and our disciplined operating measures and capital deployment. We ended the year supporting more than 4,500 locations and nearly 28,000 gaming machines nationwide, demonstrating the breadth and durability of our platform and its predictable revenue profile.

In Illinois and Montana, we continue to optimize our footprint and terminal base, driving steady hold per day improvement and margin expansion. Illinois remains our largest and most established market, and we continue to execute on our strategy to improve unit economics and expand margins through disciplined deployment and route optimization. We are excited by and are closely monitoring developments in Chicago, following public announcements regarding the introduction of video gaming terminals in licensed establishments. As the leading operator in Illinois, we believe Accel is uniquely positioned to participate meaningfully.

Our existing regulatory relationships, operating infrastructure, route management capabilities, and strong financial position provide a clear advantage in our ability to service and scale this market quickly and efficiently with our existing platform. As we discussed in more detail in our January 8, 2026, press release, the city estimates 2,500 new locations in Chicago over the long term. We view this as a highly attractive opportunity that would enable Accel to further leverage its fixed cost structure and generate incremental returns at compelling margins. As always, we will remain focused on disciplined execution and creating long-term shareholder value.

Turning to our developing and strategic growth markets. We continue to generate positive momentum. In Nevada, terminal count increased 13% year-over-year for the fourth quarter, supported by recent strategic and accretive route expansions. We are encouraged by the trajectory of new placements and believe the market is positioned for steady improvement. After adjusting for the stub period in 2024, Louisiana revenue increased significantly in the fourth quarter. We continue to execute our bolt-on acquisition strategy and optimize the Toucan Gaming platform. Louisiana remains a priority market for consolidation with many tuck-in opportunities that clearly fit our return thresholds.

We are well-positioned as a buyer of choice. The market currently has a good pipeline. Nebraska and Georgia delivered strong growth both quarterly and on a full year basis, demonstrating the ongoing expansion and increasing leverage of our operating platform as these markets expand and develop.

As our density increases, we expect continued profitability to follow. At Fairmount Park Casino & Racing, we completed our first full racing season and ramped up our casino operations following the April 2025 opening. Customer engagement has been healthy and monthly performance has continued to build as consumer awareness increases. We continue to evaluate the timing and scope of future development phases. As we have highlighted in the past, in addition to being an attractive standalone business, Fairmount diversifies our revenue mix and provides operating flexibility.

Reflecting our commitment to shareholder returns and our belief that Accel represents an attractive long-term investment, we repurchased approximately 3.8 million shares of common stock during 2025, including 1.5 million shares in the fourth quarter. Our capital allocation framework, which includes our $300 million revolving credit line, remains disciplined and return-focused, balancing organic investment, bolt-on, and other strategic acquisitions, balance sheet strength, and opportunistic share repurchases.

As we look ahead to 2026, our priorities remain clear: drive steady organic growth in our core markets, scale profitability in developing and new markets, execute accretive tuck-in acquisitions, and consistently convert earnings into free cash flow.

Before my closing comments, I want to touch on our February 2 press release regarding the leadership transition. As we shared, I've stepped into the chairman role effective immediately, and in August, I'll transition out of the CEO role as Mark takes over day-to-day leadership of the company. This new role gives me more flexibility to leverage my local and national relationships to help Mark and the Accel team capitalize on the attractive growth opportunities in front of us, including expanding into the Chicago VGT market. I'm excited to keep working closely with Mark as we continue to profitably grow Accel.

With that, I'll turn the call over to Mark, to review our operations in more detail.

Thank you, Andy. From an operating standpoint, 2025 was a year of steady execution across each market with continued focus on route quality, service performance, and targeted investment. In Illinois, our team focused on improving location mix, redeploying underperforming assets, and concentrating investment into higher-yielding gaming machine placements. That work continues to drive steady improvements in revenue per machine and overall margin performance, even though it means we largely maintain flat location counts.

The rollout of Ticket-In, Ticket-Out technology in Illinois is progressing as expected, with 81% of Accel locations having all gaming machines fully TITO-enabled. While still early in the penetration cycle, TITO is expected to enhance player convenience, provide benefits to Accel in terms of streamlining cash handling, and improve overall operating efficiency. As adoption continues to increase, we believe it will contribute to both revenue stability and cost improvements.

Montana continues to benefit from our proprietary content and systems. The strength of that market is not just stability, it's predictability. Our teams there continue to refine gaming machine placement strategy and leverage our in-house technology to support profitability per location. Additionally, our Grand Vision Gaming wholly owned subsidiary continues to develop new content, which allows us to enhance margins through exclusivity, as well as lower our CapEx and increase free cash flow.

In Nevada, the focus has been integration, expansion, and operational alignment. During the quarter, we completed the accretive acquisition of Dynasty Games, which added 20 locations and approximately 123 gaming machines across northern Nevada. This transaction expands our footprint into several new communities and further strengthens our route across the state.

During the quarter, we also entered into a new route partnership with Rebel Convenience Stores, which adds 55 locations and 424 gaming machines across southern Nevada, starting in January of this year. We leveraged our deep capability across our national teams to accomplish this arduous deployment in only 6 days. The Rebel rollout demonstrates our ability to efficiently launch new locations across markets, including new markets like the City of Chicago, so location owners can begin offering gaming entertainment to their patrons as soon as possible.

Accel's Nevada operations now deliver state-of-the-art gaming and technology solutions to more than 600 locations, supporting approximately 3,000 gaming machines. The integration of Toucan Gaming in the Louisiana market has progressed well, and our field teams have been focused on route optimization, gaming machine refreshes, and disciplined bolt-on acquisitions. The pipeline for acquisitions remains healthy, and we're confident in our ability to continue consolidating attractive opportunities that fit our return profile.

At Fairmount Park Casino & Racing, our operational teams completed a full racing season while continuing to ramp casino performance following the April 2025 grand opening. We've gained valuable insight into customer behavior, marketing effectiveness, and operating cadence, which is informing how we approach future development phases. Importantly, we are seeing consistent month-over-month engagement growth as awareness of the park builds.

Across all markets, our operational approach remains consistent: prudent capital placement, service excellence at the location level, data-driven decision-making, and strong local relationships. That operating discipline is what underpins our financial performance and supports our ability to generate growing free cash flow.

With that, I'll turn the call over to Brett, to review the financial results in greater detail.

Thank you, Mark, and good afternoon, everyone. I'll begin our fourth quarter results and then provide additional detail on our full-year performance on the income statement, cash flow, and balance sheet. As Andy mentioned, for the fourth quarter, total revenue increased 7.5% year-over-year to $341 million, the highest fourth quarter revenue in the company's history. Growth was driven by continued strength in our core markets, incremental contributions from developing markets, and the continued ramp at Fairmount Park.

Adjusted EBITDA increased 19% year-over-year to a record $56 million. Importantly, adjusted EBITDA grew meaningfully faster than revenue, reflecting expense discipline and operating leverage across the platform. As our network grows, we continue to see margin expansion driven by route optimization, density improvements, and cost discipline. Operating income for the quarter also improved year-over-year, reflecting both top-line growth and stable overhead. Net income for the quarter was $16 million.

As noted in the press release, results benefited from a $0.6 million gain related to the change in fair value of contingent earnout shares compared to a $3 million loss in the prior year period. Excluding this non-cash mark-to-market item, underlying earnings growth remained strong and consistent with our adjusted EBITDA performance.

For the full year 2025, revenue was a record $1.3 billion, representing 8% growth compared to 2024. Adjusted EBITDA increased 11% year-over-year to $210 million, demonstrating continued margin expansion and scalability of our operating model. Net income for the year was $51 million. Translated into EPS, this was $0.61 basic or $0.60 fully diluted.

Turning to full-year CapEx. Full-year CapEx was aligned with our expectations and remains heavily focused on revenue-producing assets. A significant portion of our capital supports growth initiatives, including new machine placements, route expansions, and the Fairmount Casino opening and track enhancements, with the remainder dedicated to maintaining and optimizing the installed terminal base. This disciplined allocation supports strong returns and sustained cash generation.

Based on our current earnings and capital profile, we expect to continue generating meaningful cash flow, which provides flexibility to fund growth, maintain a conservative balance sheet, and return capital to shareholders.

Moving to liquidity and leverage, we ended our year with $297 million in cash and cash equivalents and net debt of approximately $311 million, down 1% year-over-year. Our leverage profile remains conservative relative to our recurring cash flow base, providing significant financial flexibility, including our currently untapped $300 million revolving credit line. During 2025, we repurchased approximately 3.8 million shares of common stock, including 1.5 million shares in the fourth quarter. We evaluate capital allocation decisions through a rigorous return-based framework comparing organic investment, bolt-on and strategic M&A, debt optimization, and share repurchases.

Looking ahead, our recurring revenue model, disciplined capital deployment, and operating leverage position us to continue converting adjusted EBITDA into cash. We remain focused on maintaining balance sheet strength while pursuing high return growth opportunities. Overall, our financial performance in 2025 extends our long-term record of growth, and we remain confident in our strong liquidity, scalable platform, and disciplined capital allocation to provide a solid foundation for continued growth in 2026.

With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Max Marsh with CBRE.

Andy and Mark, congrats on the new roles. It looks like things are moving ahead in Chicago. IGB just started accepting applications last week. Do you guys view that as just a matter of time? Or are there any political or legislative points of failure until you guys can start generating some revenue in that market?

Thanks, Max. This is Andy. There is a process that still needs to happen within the city, but the fact that the IGB has accepted -- begun accepting applications is a great sign. So we're still waiting on some of the procedures related to licensing in the city and how the cities will either regulate the gaming or facilitate individual establishments and getting started and obtaining a license from the city. So there is some of that still that needs to happen, but the fact that the IGB is accepting applications is a great start.

Great. And as we think about the market opportunity in there, should we think about that as similar to the unit economics of the state at large? Or do you guys have the potential to do a little bit better there with your established service routes and relationships in the state?

So it's kind of a twofold question. Operationally, we have a fantastic platform in order to service, collect, and facilitate play at all the establishments. But the reality is the actual establishments on a whole have less square footage than the establishments we operate elsewhere in the state. Obviously, that's because the city has greater density, real estate is more valuable and the taverns and establishments aren't allotted as much square footage. So we believe that we're in the rest of the state, many of the locations will easily accommodate 6 machines. There may be some constraints on certain establishments to get to that 6 machine. So we're estimating a lower amount of average equipment. We don't have that exact number than we do in the rest of our portfolio.

That being said, the density of population is far greater in the city. And so therefore, the average play per machine should be higher than the average play of our existing portfolio. So the final element of all of this is the difficulties of operating in the city in terms of parking, logistics will probably impact our cost a little bit, but we'll be able to offset most of that by the fact that we have a platform that we've got -- we're able to service it from the outside. We will have to establish some type of warehouse facilities and support within the city. But all in all, it should be a very positive impact on our business.

Your next question comes from Jordan Bender with Citizens Bank.

We've been watching Hawthorne play out over the last several weeks. Curious to get your views around the bankruptcy that track and depending on how that plays out, you could be left with the only operational track in the state. I guess also, what does that kind of mean for your investment at your track, including the casino?

Jordan, it's Mark. So I'd say as a horse racing fan, it's a tough moment for Illinois horse racing. Hawthorne's decline is painful for everyone who cares about sport racing, particularly in Illinois. And our thoughts are with the Cary family. They carry Illinois horse racing for over a century, and we wish them well and whatever comes next for them.

That being said, the pari-mutuel horse racing market is facing significant headwinds nationally as well as in the state of Illinois. But we are, as you point out, still standing and still very much excited about the coming season, which starts in April, and we stand ready to support the Illinois Racing Board in any capacity that they require to help make sure racing operations specific employees, horsemen and all the backside communities have a workable path going forward.

Great. And then just maybe sticking with you, Mark. As you step into the CEO role, do you have any different views across any aspects of the business, the geographic segments of how they're kind of run today?

So we kind of have talked a bit in the past about how we break our markets up into core, developing and emerging. I think we're pretty excited about '25, and we're definitely excited about '26 in terms of all those different categories. They all sort of benefit from each other, and there's all sorts of overlap in terms of content and systems, which we think could drive growth in all of them. So I think what we're fundamentally trying to do is shift the route business from a real logistics-heavy business to an entertainment and hospitality business that's more nuanced, more niche and definitely more differentiated with higher margins. I'd say that's really what's driving me in terms of when I take over. But I would point out that Andy has done an amazing job, and there's a big shoes to fill and a huge platform to grow off of.

Your next question comes from Patrick Keough with Truist Securities.

Congrats on a really nice quarter, and congrats to Andy and Mark on the transition into new roles. For my first question, there's been some route gaining traction in state sessions like Pennsylvania, Virginia, Missouri and North Carolina. Could you talk about how you view any of these as likely to legalize this year? And could you think or talk about how you think about building versus buying to get a foothold in these markets if they go online?

Patrick, it's Mark. I would say we formally included Chicago in those emerging markets. And thankfully, that's now going to be a reality. So we're pretty excited about that. That being said, there's -- these types of situations don't happen often. And so I'm a little more conservative in terms of the other markets that you mentioned, Pennsylvania, North Carolina, Virginia, Missouri. They all have outstanding legislation in terms of legalizing some form of electronic gaming machines for routes.

Each of them has their own nuances, which may or may not make it a higher probability to go legal. But I would just caution a lot of these states, except for North Carolina, have a casino, which is always an issue with trying to pass legislation for VGTs and always makes it very difficult. And it's just naturally difficult to pass gaming laws. So we prepare for the best, but our budget and our expectations are prepared for not having this in this year, if that helps.

Your second question in terms of -- yes, in terms of acquiring things, we actually have a pretty good ground game in a lot of these markets like Chicago, for example, where organically, we will acquire stores through our own internal customer acquisition group. But certainly, as Andy showed over the last 17 years, we will ultimately acquire other routes over time as that sort of unfolds.

Great. And a question on Illinois, if I could. It looks like location count declined again quarter-over-quarter. Could you just give an update on maybe what inning you're in of pruning and where you see this trending over the next few quarters?

Patrick, it's Andy. So as we've talked about in the past, this is a continuous process of improving and optimizing our Illinois route and having nearly 2,700 establishments. We're always looking at the performance at the bottom and whether or not it makes sense to continue operating in those locations. And as we acquire or win new locations every month or every meeting with the IGB, we take an even deeper look at those locations and oftentimes reallocate our assets to what we expect to be higher-performing positions. So I would expect that with such large numbers, we'll continue doing this. There may be some more loss of locations, but you'll probably see as Chicago comes on for that trend to be reversed as there'll be a significant increase in locations from the Chicago market.

Your next question comes from Steve Pizzella with Deutsche Bank.

Also wanted to just say thanks to Andy for the time over the years, and congratulations to you, Mark. First, just wanted to ask how you think about the increased tax returns here moving forward. Have you seen historically a direct correlation with that and increased gaming at your locations? And have you maybe seen any impact thus far recently as returns start to come in?

Steve, yes. So that typically has got a high correlation in terms of play. February, March, as you can imagine, are usually our best months. And we're -- we don't guide, but certainly, that seasonal impact hasn't changed this year from what we're seeing.

Okay. Then how should we think about the growth CapEx in 2026? And how do you think about balancing the buybacks versus some incremental tuck-in acquisitions?

Sure. So from a capital perspective, maintenance versus growth, the way we define those two is probably important to just refresh everybody on. But the way we define it is growth is a new location we're adding machines to it or it's a location, for example, that has 5 machines and we go to 6 Capital in those 2 instances would be growth. Most of what's left is maintenance. So largely in our maintenance space, we consider a replacement of a brand-new machine in an existing location with -- that is at capacity for machines. Even though it's a brand-new machine, we consider that maintenance. That's a little bit different than other companies, but that's how we think about it.

So I want to at least set the table on that. But in terms of like next year and where that's going, if you think about our space and you think about what we just got on talking about in terms of reducing our locations and kind of firing bad customers, so to speak, the need for us to continue to spend a lot to expand our locations in Illinois is low. And therefore, most of the maintenance or most of the capital that we're spending next year in our large market is going to be on that maintenance side. If you think about the other markets, those are investing in growth side. However, those are much, much smaller markets. So when you look at the company as a whole, you see most of it sitting in maintenance capital. And then refresh me of the other question, I'm sorry.

I guess how do you think about balancing buybacks versus incremental tuck-in acquisition or maybe something bigger?

Yes. So I would say our position on that hasn't changed much over the last 6 months or so or even longer than that. But we look at every dollar of investment, and we look at the return on investment we can get from it, and we just measure that against our internal capital returns versus our M&A versus debt payoff and shareholder buybacks and that sort of thing. Given where things are moving and kind of just recent studies, I think M&A tends to be the most attractive if we can get the price right. So that tends to be where we focus our energy on the most. But to the extent that there's nothing in the pipeline or things that we don't like, then we'll pursue alternative activities.

I guess maybe if I could follow up real quick. Do you think about the balance sheet any different now moving forward than the current leverage profile historically of the company, which has been fairly conservative? Would you be more willing to take on additional leverage should the opportunities present itself, I guess, or potentially incremental capital return?

Yes. I think the way that I -- so first of all, again, I would go back to -- we're going to evaluate the deals that they come through. But the way that I think about the fact that we have an untapped accordion feature out there, a revolving feature out there is likely going to be for something that would be significant sort of M&A. That would be the ultimate use for something like that. Most of the stuff we're going to do with our current cash balance and through tuck-ins and that sort of thing.

So yes, I wouldn't think that we need to hit that revolver. And I think if anything, we're not in the business of wanting to lever up substantially for any particular reason right now. There's just not enough evidence of it. It would have to be a very some sort of very large deal or something like that, that came up for us to go down that path.

Your next question comes from David Bain with Texas Capital Bank.

Congratulations, Andy and Mark, for the new roles. I know this was asked kind of early on, but maybe looking at Chicago differently, just given your infrastructure and the personnel dedicated to it, can we expect your market share or really like fair share to potentially exceed what you have in the state, again, kind of just given what you have set up today, you're better able to help locations with licensing, maybe cherry picking, if you will. Is that a fair assumption versus if a new state just opened up? I mean, how should we be looking at maybe it from that perspective?

So thank you for the question, David. Looking at Chicago, we see ourselves as an obvious leader from our experience, from the fact that we're the most chosen company to do business with in the State of Illinois, and we expect to continue to win in that market. That being said, I don't expect us to greatly exceed our current market share in the City of Chicago. Today, we're in the -- just shy of 30% range of the market. I don't think we're going to be any more than that. But what I do think is the performance per location will be greater than what we show in the rest of our portfolio. And we've seen things happened over the last, and we're now in our 14th year of operation that allow us to better select locations, better to equip them. And I think the performance that we'll achieve will exceed the rest of the portfolio's performance.

I guess I'll switch gears to TITO. I mean, a high percentage of machines now converted. But what inning do you think we're really in, in terms of the benefit of that transition? And do you still see that as material going forward?

Yes. Yes. So we have -- it's a great question, David. We have about 81% of the machines upgraded. But what happens is not all the machines are upgraded in every location. And so there's machines that they can take their ticket and utilize for play, and there's ones that they can't. I think once we get closer into the 90s, then you're going to see -- start to see a real benefit.

The other thing that really needs to happen is the player has to change its behavior. They're just learning after playing with cash entirely for the last 14-plus years that they can use their ticket to go from machine to machine.

I believe that as far as the innings in the game, we're probably third inning by the time we talk again at the end of -- when we announce first quarter earnings, we'll probably be the fourth or the fifth. I think it will start accelerating through the end of the year. And it's something that we're constantly evaluating. We're just starting to optimize because we're getting some confidence that in certain establishments, the customer is comfortable with utilizing the tickets, but it's something that's, again, like third inning in terms of the implementation and results.

Your next question comes from Chad Beynon with Macquarie.

Just a couple for me. One, just wanted to ask a higher-level question in terms of opportunities maybe in certain markets to partner with other companies, whether it's digital or other consumer companies just to help drive additional revenues to the site or help just acquire customers. Could that be an initiative that could help your yields within any of your markets in the near term?

Chad, it's Mark. So just to remind everyone, we do partner with a fairly significant gaming operator in Illinois, and that's FanDuel with Fairmount Parks online sports betting license. In terms of other markets, we're always looking for partnerships.

Route gaming is really just an extension of local gaming, which if you go to other parts of the world, includes online, includes owning local casinos as well as doing distributed gaming and bars and taverns and things like that. So there's always a possibility. We also do produce our own content through our subsidiary, GrandVision Gaming. And there's always elements of partnering with content producers as content is a big driver of play in our markets.

So it's a great question. We're always looking for those partners. As I mentioned before, to really drive away from being a more commodity-like vendor. We really need to specialize in content and payments and loyalty and things like that, and those are sometimes best done through other partners. So we've always got our eye on it.

Excellent. And then I know you just hit on TITO, but around the W2G jackpot limits, is that something that you think can also help drive additional yields across your fleet?

So Chad, this is Andy. The answer is yes. But the challenge is the -- in Illinois, you need legislation for the jackpot to be raised. And then you need the manufacturers to redo the software to accommodate it.

In terms of priorities, the route markets come far after the casinos because they can make those changes right away and have the leverage to be able to distribute the games with the new jackpots to many, many markets. I expect Illinois probably to be the first one to be able to experience it because it's the greatest opportunity. But -- and probably Nevada will see it because they utilize the same software that's utilized in the casinos. The other markets will follow, but I wouldn't expect a real bump from that in -- we don't expect it to happen in 2026. So eventually, it will help us, but it's kind of next step for the manufacturers.

[Operator Instructions] Your next question comes from Greg Gibas with Northland Securities.

Congrats on the results. I wanted to follow up maybe on the opportunity within Chicago, and maybe what you see as kind of the total establishment count for that market. And maybe if you could share a little bit more on estimated timing there. I know that you mentioned they're accepting applications is a good sign. When do you expect to maybe hear more about that developing?

Well, as Andy said, we're very confident the market will roll out given that the Illinois Gaming Board is accepting applications from locations. There are some rules that need to be promulgated. We're helping Chicago leaders work through that and provide sort of best practices to make and to expedite the rollout. If you really had to push me against the wall to say when we're going to go live, I'd say more likely later in the Q4 for '26 or potentially even Q1 of '27, just given the backlog of applications currently at the Illinois Gaming Board. But again, it depends a lot on how quickly the city can roll out these rules. So we're actually awaiting and we're helping out leadership in terms of helping them do best practices.

Okay. Fair enough. And if I could ask, I imagine organic growth is pretty close to the revenue growth. But could you maybe break that out considering, I think, Fairmount and some Louisiana acquisitions closed, I think, late in the prior year?

Yes. So from a revenue perspective, and we disclosed this, but from a revenue perspective, those 2 acquisitions made up about 5% of our Q4 revenue and about 5% of our full year as well. So in terms of the revenue side, that's about what they are. We don't disclose on the EBITDA side, but those are our emerging investments, so emerging investments in the plays that we have there. So we're not making double-digit growth or anything like that on the bottom line. But on the top line, we've talked before about it, and that's about 5%.

There are no further questions at this time. I will now turn the call back to Andrew Rubenstein for closing remarks. Please go ahead.

Thank you, everyone, for joining us again today. Accel presents a differentiated investment opportunity with enhanced financial flexibility, expanding market opportunities and a scalable platform capable of delivering steady growth and improving returns over time. I want to especially thank our partners, our shareholders and our team members. Our team members for their dedication and their continued execution. Their hard work is what drives our performance and positions us for sustained success. We appreciate all of you joining us today, and we look forward to updating you again on our progress next quarter. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon. Thank you for attending the Accel Entertainment Third Quarter 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] And I would now like to pass the conference over to your host, Scott Levin. You may proceed.

Welcome to Accel Entertainment's Third Quarter 2025 Earnings Call. Participating on the call today are Andy Rubenstein, Accel's Chief Executive Officer; Brett Summerer, Accel's Chief Financial Officer; and Mark Phelan, Accel's President of U.S. Gaming.

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 those 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 forecast 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 today. In the third quarter, Accel delivered another strong and resilient performance. For the quarter, total revenue increased 9.1% year-over-year to $330 million. Net income was $13 million and adjusted EBITDA grew 11.5% to $51 million, reflecting consistent execution and expansion across our markets.

Growth this quarter was supported by higher gaming terminal counts, stable machine performance and improved efficiency in capital deployment. This demonstrates the strength and resilience of our distributed gaming model and our disciplined return-focused approach to growth investments, including Fairmount Park.

In our core markets, Illinois and Montana, we continue to build on our leading positions and leverage our scale to drive efficiencies, optimize our location mix and expand margins. Together, Illinois and Montana represent approximately 82% of our revenue. In Illinois, top line growth continues to be driven by same-store performance and new machine placements.

Our focus on higher-yielding locations and disciplined capital management remains a key driver of consistent results. We are also advancing the rollout of ticket-in, ticket-out functionality, which enhances player convenience and streamlines operations.

In our developing markets, Nebraska, Georgia and Nevada, we continue to build scale and make steady progress in growing profitability. Nebraska and Georgia both delivered strong double-digit revenue growth, driven by location expansion and market share gains. As previously discussed, this compensated for a modest decline in year-over-year revenue for Nevada due to the loss of a key customer in 2024, resulting from a change in ownership.

Across these markets, our capital investments are translating into stronger returns with Nebraska and Georgia delivering the highest quarterly revenue growth within our developing portfolio. Both markets continue to experience significant profitable growth and are tracking toward market expansion through 2026, consistent with our expectations and long-term model. Developing markets currently represent just over 12% of our total revenue.

In our new markets, performance continues to ramp up steadily. In Louisiana, which currently represents about 3% of revenue, results continue to impress and scale, reflecting the successful integration of our Toucan Gaming acquisition. The Louisiana market now includes 670 terminals across nearly 100 locations, and we continue to optimize our routes to drive higher returns for the future. We look forward to developing a strong pipeline of bolt-on acquisitions of truck stops in Louisiana.

At Fairmount Park, we continue to see strong player engagement and revenue growth since opening the casino in April. In these early months of the Park's operations, we've gained valuable insight, which will be helpful in evaluating the timing and scope for our Phase 2 expansion. Early results support our long-term confidence in the property's contribution through the racino, food and beverage offerings and our sports betting partnership with FanDuel.

We are highly encouraged by sequential monthly revenue growth, reflecting the steady ramp-up of customer engagement as we refine the gaming experience and expand brand awareness heading into next year. Across all of our markets, we continue to benefit from the diversification and flexibility of our distributed gaming model. This allows us to allocate capital efficiently and capture growth opportunities across both new and established markets. Our CapEx execution process is rigorous and data-driven, supporting deployment of capital where it is expected to generate the highest incremental return.

During the quarter, we completed a $900 million senior secured credit facility, consisting of a $600 million term loan and a $300 million revolver, each with a 5-year maturity. This refinancing strengthens our balance sheet, enhances liquidity and lowers our cost of capital while extending maturities to 2030. We also repurchased $6.8 million of our common stock during the quarter, bringing total year-to-date stock repurchases to roughly 2.2 million shares or $23.7 million.

As we look forward, our growth investments, including software, technology and data analytics upgrades in addition to machine refreshes remain balanced across our core and developing markets as well as our new markets, where early investments are producing solid returns.

As it relates to M&A, we continue to evaluate opportunities within the large and fragmented local gaming market estimated at over $15 billion nationally. Our approach remains being disciplined and focused on accretive opportunities that strengthen our gaming platform without stretching our balance sheet.

Looking ahead, our priorities remain clear: driving steady growth and efficiency in our core markets, scaling profitability in our developing and new markets and maintaining financial discipline while returning capital to shareholders through opportunistic share repurchases. With strong free cash flow generation, enhanced capital efficiency and scalable opportunities across both existing and emerging markets, we believe Accel is well positioned to deliver steady top line growth and improving returns as we move into 2026.

Our third quarter results demonstrate the strength of our unique business model and our success in generating consistent financial performance and cash flow across a diversified local-focused gaming portfolio. With that, I want to take a moment to thank Mark Phelan for leading our finance team as interim CFO over the past 7 months, all while continuing his role as the President of U.S. Gaming. Mark brought focus and steady leadership through this transition and has played a big part in helping our new CFO, Brett Summerer, as he gets up to speed across all of Accel's operations. Mark will continue to join our quarterly earnings call as Accel's operational leader, providing valuable insight into our business performance and growth potential from an operations perspective.

I will now hand it over to Mark.

Thanks, Andy. I really appreciate the trust you and the Board placed in me to lead the finance team during this transition. It's been a privilege to work alongside such a strong group as we set the stage for our next phase of growth. I'm also really excited to introduce our new CFO, Brett Summerer. As we mentioned in our September release, Brett brings more than 25 years of experience in senior finance, operations and IT roles at Kraft Heinz, Corning and General Motors. Most recently, as CFO of Verano Holdings, he built a 70-person finance and IT team, led major system implementations and completed over 20 M&A deals in a highly regulated, fast-growing industry.

Please join me in welcoming Brett to Accel.

Thanks, Mark, and good afternoon, everyone. Before reviewing the financial results, I want to say how excited I am to be part of Accel. I joined the company in late September because I see a truly compelling opportunity. Accel's unique local model, consistent execution, strong financial foundation and a clear focus on both near- and long-term growth create an exceptional platform for continued success. I look forward to working with Andy, Mark and the broader Accel team as we continue to enhance operational excellence and deliver value for our shareholders.

Now turning to the results for the quarter. Total revenue was $330 million, an increase of 9.1% year-over-year, driven by growth in our core markets and incremental contributions from our developing and new markets. Breaking that down by state, Illinois revenue increased 7% year-over-year to $239 million, supported by stable demand and continued location optimization. The rollout of TITO continues as planned, improving player convenience and reducing cash handling costs across the network.

Montana revenue increased 2.1% to $40 million with our proprietary gaming content and systems continuing to enhance profitability per location. Nebraska revenue grew 30% to $9 million, driven by steady adoption and market share gains. Georgia revenue rose 49.3% to $5 million, reflecting continued growth as we leverage our technology platform and route management expertise. Nevada revenue declined 7.4% to $26 million due to the loss of a key customer in 2024, resulting from a change in ownership. Louisiana contributed revenue of $9 million, driven by continued ramp-up and integration of the Toucan Gaming acquisition, which expands our footprint with 670 gaming terminals in nearly 100 locations. And finally, Fairmount Park continued to ramp up operations following its April launch with monthly gaming revenue increasing sequentially through the summer.

Operating income for the quarter was $25 million, up 16.1% year-over-year, while net income increased to $13 million. Adjusted EBITDA was $51 million, up 11.5% year-over-year, driven by top line growth and strong cost discipline. Capital expenditures were approximately $21 million for the quarter and $72 million year-to-date. As we've discussed, roughly 40% of our CapEx directly supports growth initiatives, including Fairmount Park and continued investment across our markets. We are affirming our full year 2025 CapEx forecast of $75 million to $80 million.

Turning to the balance sheet. We ended the quarter with $290 million of cash and cash equivalents and net debt of approximately $305 million. As Andy mentioned, we completed our new $900 million senior secured credit facility during the quarter. Proceeds were used to repay and terminate all outstanding commitments under our prior credit agreement. The new facility enhances liquidity, extends maturities and reduces our cost of capital, further strengthening our financial position and supporting disciplined growth and shareholder returns. Our balance sheet remains strong with ample liquidity and conservative leverage, providing the flexibility to invest in growth while continuing to return capital to shareholders. I look forward to sharing my plans with you on the next call as we kick off and move into 2026.

With that, I'll turn the call over to the operator. Please open the line for questions.

[Operator Instructions]

The first question is from the line of Steve Pizzella with Deutsche Bank.

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?

Steve, this is Andy. Thanks for the question. Can you repeat it again? You got cut off at the beginning, so we didn't hear the very beginning of the question.

Yes. Just in Illinois, it looks like another quarter of optimization with locations down and win per day up. How should we think about the Illinois strategy going 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?

Okay. Yes. So we will continue to optimize our route in Illinois. And as we sign up locations, on average, they're significantly better than the locations that closed down. So we'll continue to see the machine counts be relatively stable, maybe slight growth, where the average revenue per machine should continue growing. And we're -- that is kind of the strategy that we're pursuing, and I think you'll see that play out through '26.

As far as the effects of TITO, we're still in what we refer to the early stages of the rollout. There's only a, like mid-single-digit utilization of TITO in our overall kind of payment into the machines, and we'll see that continue to grow as we've seen it literally almost every day. So as more and more machines have the -- become TITO-enabled, that should naturally lift that number into the double digits and where we probably will see the number be by the time we report again at the end of February. But that TITO effect probably will take well into the second quarter for it to really be noticeable, whether it's in our overall cash balances or any type of performance enhancement.

Okay. And then on the balance sheet, you do have a fair amount of cash considering your size and should generate a decent amount each of the next couple of years even with the Fairmount CapEx. How do you think about the uses of the free cash flow moving forward?

Steve, it's Mark Phelan. Just remember, a large amount of the cash is used to load our redemption terminals on our bigger routes like Illinois. That being said, I think we're fairly underlevered relative to our peers. And in terms of M&A, I would say if you group them into 2 buckets that would include like transformational M&A versus bolt-on, transformational, we still see some interesting things, and they become cheaper, but it's still -- we're getting rewarded for our patience, and I think we will continue to be patient on those. In bolt-on, we actually see a lot of interesting stuff, particularly in our growth markets. And we have been patient on those as well. And I think we've got the capacity now to absorb some new additions.

Yes. And just to add to what Mark said, obviously, when we're sitting on any influx of cash, we're going to look at it and use it in the best way possible. So we look at all opportunities. We have a pretty rigorous process to look at return on investment across share buybacks versus debt payoffs versus M&A, et cetera. So it's going to be case by case. And as things come in, we will evaluate them and decide accordingly.

The next question comes from the line of Sam Ghafir with Macquarie.

I wanted to quickly touch on the M&A environment. Curious if you guys have seen any shift in seller expectations over the last couple of months, just given that public equities for other stocks in the gaming sector have come down a bit. Wondering if there's been any change there?

Thanks for the question, Sam. It's Andy. We haven't seen anything significant, but what we are seeing is people's kind of realization that there has been a change. And how that will affect the overall M&A market, we're not sure. It usually has a lag, but people are definitely recognizing that there has been a reduction in the multiples that the companies transact at and that what is basically acceptable in today's environment.

Okay. Great. And then as a follow-up, I noticed that Nevada had a nice uptick in locations. Is there anything specific to call out for that region?

No. We're still -- we're transitioning some new locations into our portfolio. FuelBros was a group that we have added. I expect that we'll continue to grow that market. We've been outperforming and have won business more frequently than in the past, and I think that trend is likely to continue.

Awesome. If I could just sneak one more in. Just wondering as we head into '26, what are some states that potentially could make some headway on route gaming expansion?

So I'll take the question in 2 parts. The first part is states that don't have gaming. We are monitoring Pennsylvania pretty closely as we have in the past. We're always looking at Missouri. North Carolina has got closed a few years ago. There's always the potential that, that can reignite and Virginia has definitely considered it again as they've had legislation that got close. So those are the 4 markets that we think have the most probability of having a new VGT market.

What we have seen in the last year or 2 is existing markets expanding with the legislation or introducing enhancements to the existing legislation. We've seen that in Georgia. We've seen it in Louisiana. We've seen some modifications in Nebraska. All of those kind of changes have made it -- have been relatively favorable for the operator to increase their revenue, to provide better gaming experiences for the player and in turn, benefit the overall Accel performance. And so I think you'll see those 3 markets, in particular, have a lot of benefit in the future, and Accel will continue to perform in those 3 markets.

The next question comes from the line of Greg Gibas with Northland.

I wanted to follow up on your commentary around bolt-on M&A. And I guess get a priority of the markets that you're kind of looking at. Is it primarily Louisiana focused? You mentioned potentially new markets. Just wanted to get a sense of maybe priorities for bolt-on M&A?

Greg, it's Mark. The primary market for bolt-ons is Louisiana. The thesis behind investing in that state was the opportunity to do that kind of activity, and we're seeing a really healthy pipeline. So we're excited about that state for the next couple of years in terms of bolt-ons. Besides that, there are -- Illinois is always a good target market just given the amount of operators available for sale at any one point in time. And we're always working on deals in that state. Again, it's price is kind of the key criteria. And as Andy said earlier, people are clearly getting a little more realistic about pricing. So there may be more movement in that going forward. But the #1 priority is really to get our Louisiana investment to the scale that we think it will be in the future.

Great. Makes sense. And do you have a same-store sales growth number?

We don't disclose that at this -- in the quarter. So we're talking just [indiscernible] numbers.

Yes -- exactly, yes. Okay. And then I guess I wanted to just see if kind of anything has changed surrounding the opportunity or maybe on the timing of the ongoing ramp of Fairmount Park or just anything changing in terms of your future development plans there?

Yes. Greg, we're still in the development stage. We're -- as Brett said earlier, and you can verify this on the Illinois Gaming Board side, gross gaming revenue adjusted is increasing every month. October was very consistent with that and good growth. So we feel good about it. We're still reviewing several different options for the permanent, and we're working hard on that. Maybe at some point in the next 6 months, we'll have some feedback for you guys on that. But as of now, it's all momentum ahead and trying to just acquire customers and provide a great experience.

There are currently no questions registered. [Operator Instructions] There are no further questions waiting at this time. I would now like to turn the conference back for any closing remarks.

Thank you. And in closing, Accel is excited to continue the strong momentum we've carried throughout the year. We remain really confident in our long-term strategy, and we're excited to share some new opportunities ahead when we connect in the new year. I always appreciate all of the partners and shareholders, but most importantly, our employees at Accel for their continued support. And I look forward to sharing with all of you our progress when we report results next year.

Thank you for joining us today, and we look forward to a good holiday season and wish you all well. Thank you.

That concludes today's call. Thank you for your participation, and enjoy the rest of your day.

Good afternoon, and thank you for attending the Accel Entertainment Second Quarter Earnings Call. My name is Jason, and I will be the moderator today. [Operator Instructions]

I'd now like to pass the conference over to your host, [ Scott Levitt ].

Welcome to Accel Entertainment's Second Quarter 2025 Earnings Call. Participating on the call today are Andy Rubenstein, Accel's Chief Executive Officer; and Mark Phelan, Accel's President of U.S. 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 today.

In the 2025 second quarter, Accel Excel generated record quarterly revenue and adjusted EBITDA of $336 million and $53 million, respectively. We continue to build on our leading position in delivering the best gaming experience to the U.S. 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 Q2 growth reflects our disciplined expansion strategy and consistent execution in our core, developing and new markets.

Accel's continued growth will benefit from its strong competitive position and healthy balance sheet as we pursue our multipronged 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, Accel 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&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 million. This increase was driven by our strategic game enhancements and location optimization initiatives, which resulted in a 6% year-over-year increase and location hold per day to $910.

Our second largest core market, the Montana distributed gaming route grew revenue by 2.6% and 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 26.1% and 53.5%, 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 3 markets, where strategic investments are now beginning to contribute to Accel'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 million of second quarter revenue, and we expect to realize additional synergies in 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, Excel's installation of 271 gaming positions completed Phase 1 of its casino at Fairmount Park. Our soft opening just prior to the Kentucky Derby, generated a strong turnout bringing excitement to this historic venue. Fairmount continues to ramp up steadily and we remain confident in this long-term contribution. We expect our player acquisition and retention strategy to expand the player database and drive market share gains.

In addition to our racing and casino business at Fairmount, Accel benefits from our 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 Fairmount and the FanDuel revenue-sharing arrangement reinforce our confidence that Fairmount Park Casino & Racing will continue to contribute to our adjusted EBITDA growth as we move into 2026.

Looking ahead, our M&A pipeline remains active. We continue to evaluate opportunities across the large and fragmented local gaming market, estimated at over $15 billion 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 Accel to expand our footprint while maintaining strong financial discipline.

Our consistently strong financial performance and ongoing progress reflects 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 going to turn it over to Mark to walk us through the financial results in added detail.

Thanks, Andy. For second quarter, total revenue was $336 million, representing year-over-year growth of 9%. Without the acquisition of Fairmount Park and our Louisiana assets, total revenue was $317 million, representing year-over-year growth of 2.4%. Adjusted EBITDA for the second quarter was $53 million, a year-over-year increase of 7% compared to second quarter of 2024. As of June 30, 2025, we operated approximately 27,400 terminals across more than 4,400 locations, representing year-over-year increases of 3.4% and 3.1%, respectively.

As Andy stated earlier, we look at our distributed gaming portfolio across 3 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, and 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 margins. We expect that our new markets of Louisiana and Fairmount Park will experience revenue growth while initially generating lower margins as we invest in their operating platforms.

I also wanted to provide more revenue detail on our 2 core markets, Illinois and Montana. The Illinois distributed gaming market contributed $236 million of revenue, which grew by $9 million or 3.9% in second quarter 2025 compared to prior year. Our Montana distributed gaming route experienced positive quarterly revenue growth of 2.6%. While Grand Vision Gaming, Accel's wholly-owned slot machine manufacturer, saw a decline in revenue primarily due to timing on software sales as Grand Vision Gaming or GVG updates its operating platform to support product availability and Accel other markets.

GVG, our billings Montana base 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 shows a decline for Montana on a consolidated basis.

As we mentioned earlier, Nevada experienced a revenue drop from the loss of a 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 of 2025 as the team scaled our existing infrastructure. Illinois launched ticket in, ticket out, TITO late in July with a phase 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 stacks. 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 split, which are determined statutorily. The rest of our markets have revenue splits, which are negotiated between locations in Accel. 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 million. We are reaffirming our full year 2021 CapEx forecast of $75 million to $80 million, including approximately $39 million to $41 million for our legacy markets, $5 million to $7 million for Louisiana and $31 million to $32 million for Fairmount Park. CapEx for Fairmount Park covers both Phase 1, which is now complete and our initial investments in Phase 2 planning.

Following the completion of these projects, we expect normalized annual CapEx to return to the $40 million to $45 million range. At quarter end, we had approximately $331 million of net debt and $392 million of liquidity, consisting of $265 million of cash and $127 million 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 $6.7 million. This brings the total shares repurchased for the 6 months ended June 30, 2025 to 1.6 million shares at a total of $16.9 million. 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.

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 at an attractive resilient and growing market segment with large untapped potential, which presents Accel 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?

[Operator Instructions] Our first question is from Chad Beynon with Macquarie.

And I 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 have 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 up given some consumer volatility.

Chad, it's Mark. Thanks for the question. It was actually pretty consistent growth through the quarter. All 3 months generally were kind of consistent with the volume. So we didn't really see much of a peaker value, which is generally consistent.

Okay. Great. And then, Andy, just on your comments around M&A. I know you introduced the idea in a larger way, probably about a year ago with the Fairmount 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?

Thanks, Chad. 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 is -- 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 Fairmount and in Louisiana, we take advantage of those opportunities. So I would expect that we would be consistent and 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.

Chad, this is Mark, too. I would just point out that the local gaming market, of which we think we're a premier player in generally are smaller assets in that -- these are unconsolidated sort of less professional operators. And so it tends to lean where the opportunities are smaller and you can take more bite-sized acquisitions.

Okay. And I would presume with some of those, there's opportunities to improve the margins or improve something with the business that you have the business acumen to implement?

Yes. And 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 Grand Vision operations that we have. We operate systems, reward systems in both Montana, Nevada and in 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 be much more competitive and much more aggressive as we approach these opportunities.

Next question is from Steve Pizzella with Deutsche Bank.

First, you noted TITO in Illinois started in July. What are your expectations for how that can impact earnings moving forward?

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 ITB 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.

Okay. And then in Nevada, I think you noted the loss of a key customer. What is the market growing in ex of one customer. And have you seen any changes in the market to start the third quarter at all?

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 in our developing markets, even though it's a market that's been around 30-plus years.

Our next question is from Greg Gibas with Northland.

Congrats on the record results. I 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 1 completion and launch?

Yes, Greg, it's Mark. So we don't -- 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 -- some have with casino, racing and then Sportsbook and then F&B, food and beverage. And we've seen positive indicators for all 4 that kind of matched our internal expectations.

So we're pretty excited about the asset. It's still very early days. It's 13th week. But we will -- I think we commented that we think it's going to be a significant contributor in '26, and we still feel pretty confident about that.

Great. And I guess to follow up there. When do you expect to have maybe a more material update on Phase 2 timing given that you are spending CapEx this year on Phase 2 planning? And maybe what more specifically is that kind of spending going towards or allocated for?

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 some time. 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 2 is how people interact between those buildings we're still really figuring that out. We've learned a lot in the last 13 weeks, and we think we'll learn a lot more the racing season ends at the end of October.

And so we're kind of like [ TBD ] on exactly what we're going to do for Phase 2. We also have to work with the Illinois Gaming Board in order to meet their time line. So there's a lot that goes into it, but we're being -- we're trying to be very thoughtful about it and be extremely good stewards of capital.

Got it. I appreciate that. And I guess, lastly, could you just remind us of the timing of that key customer in Nevada, just as we think about year-over-year comps?

Yes. It was kind of end of Q3 when I left -- of '24. sorry.

It looks like there are no more questions. I'll pass the call back over to the management team for closing remarks.

Thank you. At Accel, 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.

That concludes the conference call. Thank you for your participation. Enjoy the rest of your day.