Accel Entertainment(US:ACEL)2024-07-31 02:04Financial Data and Key Metrics Changes - The company reported record revenue of $309 million for Q2 2024, representing a year-over-year increase of 5.7% [17] - Adjusted EBITDA for the quarter was $50 million, reflecting a year-over-year increase of 6.5% [17] - As of June 30, 2024, the company had 25,757 terminals and 4,034 locations, with year-over-year increases of 5.7% and 4.7%, respectively [17] Business Line Data and Key Metrics Changes - Revenue per location in core states: Illinois at $862 per day (up 0.5%), Montana at $612 per day (up 7.6%), Nevada at $843 per day (down 2%), and Nebraska at $255 per day (up 7.6%) [17] - The increase in Illinois, Montana, and Nebraska was driven by increased player demand, new equipment, and favorable weather [17] - The decline in Nevada was attributed to an overall increase in supply in the greater Las Vegas locals market [18] Market Data and Key Metrics Changes - The home market in Illinois experienced market-wide GGR growth of 5% year-over-year, with Accel outperforming this by growing revenues by 6% [7] - The company added almost 50 locations nationwide, with 30 in Illinois and 11 in Montana [8] Company Strategy and Development Direction - The company aims for steady state growth with low single-digit revenue growth, mid-single-digit EBITDA growth, and high single-digit free cash flow growth [11] - The primary growth levers include organic growth in Illinois, Nebraska, and Georgia, selectively owning establishments, and preparing for future opportunities in new states [11] - The acquisition of Fairmount Park for approximately $35 million in Accel stock is expected to enhance the company's local gaming capabilities and is anticipated to close in Q4 2024 [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong financial position and growth trajectory, despite trading at a low double-digit free cash flow yield [21] - The local gaming segment is viewed as an attractive growing market with opportunities for strong revenue and EBITDA growth [22] Other Important Information - Capital expenditures for Q2 were $18 million, with a projected decrease in CapEx for 2024 to between $55 million and $65 million [18] - The company is progressing in its $200 million share repurchase program, having repurchased 906,000 shares at an average price of $10.16 [19] Q&A Session Summary Question: On the M&A front, are there similar opportunities to Fairmount? - Management indicated that other opportunities resemble Fairmount but vary in scale and specifics, with the ability to take on more projects while working on Fairmount [24][26] Question: Can you discuss the Illinois gaming tax increase and TITO? - Management believes TITO will enhance player experience and potentially provide a market lift of 5% to 10%, helping to offset the tax increase [27][28] Question: Any changes in demand in Nevada? - Management noted no noticeable changes in demand, attributing the decline to supply influx [30][31] Question: How do you see the Montana portfolio evolving post-acquisition? - Management expressed excitement about growth opportunities in Montana, highlighting new software and models that have improved contracts and partnerships [32][33] Question: How should we think about cash deployment post-acquisition? - Management emphasized growth as the first priority for cash deployment, followed by returning capital to shareholders as free cash flow generation increases [34][35] Question: Will the M&A stance change after the Fairmount purchase? - Management confirmed that the M&A strategy remains aggressive, with ongoing pursuit of local gaming opportunities [41][42]