Accel Entertainment, Inc.

Hello and welcome to the Accel Entertainment Q4 and full year 2021 earnings call. My name is Katie and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. I'll now hand over to your host, Matthew Ellis, SVP of Corporate Strategy to begin. Matthew, please go ahead.

Welcome to Accel Entertainment's fourth quarter and full year 2021 earnings call. Participating on the call today are Andy Rubenstein, Excel's Chief Executive Officer, and Brian Carroll, Excel's Chief Financial Officer. Please refer to our website for the press release and supplemental information that will be discussed on this call. Today's call is being recorded and will be available on our website under Events and Presentations within the Investor Relations section of our website. Some of the comments in today's call may constitute forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, including those relating to COVID-19 and its variant strains. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward-looking statement section of the earnings press release available on our website, as well as other risk factor disclosures in our filings with the SEC. 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. I will now turn the call over to Mr. Andy Rubinson.

Thanks, Matt. Good morning, everyone. Thank you for joining us for Excel's fourth quarter and 2021 full year earnings call. I'm pleased to report we had another strong quarter, which led to a record 2021, even though we weren't open for the full year. Adjusting for the days we were closed in 2020 and 2021, year over year, same store sales grew by 38%. As we've highlighted throughout the year, The primary drivers of the growth were the higher bet limit software upgrades and the six VGT installations. Towards the end of 2021 and into 2022, we saw a small decline in expected revenue and increased operating expenses related to the Omicron variant. In Illinois, Omicron cases began to decline in mid-November and peaked in late January. while the mandatory mask mandate was already in place from August 2021 through February 2022. However, as you'd expect, by the end of February, cases dramatically declined and play has begun to return to seasonal norms. Despite the small drop in revenue in early Q1, the current momentum in our business has allowed our guidance for 2022 to remain unchanged. More importantly, we foresee no long-term negative impact. On the expense side, in addition to the higher-than-expected costs from overtime and other Omicron-related impact in Q4, we strategically elected to increase our advertising expenditures during the fourth quarter to build deeper awareness for our AE player awards and to target future location owners. While we saw minimal immediate impact from the advertising, we believe the investment will continue to drive more players to excel and help us win a larger share of new locations in 2022. Without these additional expenses, and even with reduced play, our adjusted EBITDA would have been within the range we previously guided to. I'd now like to discuss our equity interests in GoldRush. We made convertible equity investments in July and October of 2019. In July of 2021, we exercised our right to convert our convertible notes into common stock of Gold Rush. Unfortunately, Gold Rush objected to the conversion and requested that the Illinois Gaming Board deny the transfer of equity interest to Accel, which the IGB did. We strongly disagree with the IGB's position on this. and are pursuing all legal and administrative remedies to the fullest extent possible. Accordingly, we recently filed a lawsuit against Gold Rush in the Circuit Court of Cook County with respect to the denied conversion. We are claiming damages for breach of contract and the applied covenant of good faith and fair dealing, as well as unjust enrichment. As this is an ongoing legal matter, We cannot answer any questions, but the complaint is a matter of public record. Turning to Century. Based on our current license application statuses with the various regulators, we believe Century will close by the end of May. We are already licensed in South Dakota and West Virginia, and we expect to be licensed in Nevada, Montana, and Louisiana by the end of May. Century continues to significantly outperform our original estimates. and we're looking forward to adding them to the Excel family. Sticking with M&A, we also entered the Iowa market at the end of 2021 with our acquisition of Rich & Junies. Similar to Georgia, Iowa allows for electronic amusement devices where winnings can be redeemed in the form of merchant credit. While this was a relatively small acquisition, we believe it serves as a platform for future growth and remain excited about the potential opportunities in the Iowa market. On the organic front, our sales team continues to sign additional competitor and organic locations. Last year, Xcel was awarded 281 new licenses, or 35% of the total new licenses awarded. At the first IGB meeting of 2022, Xcel was awarded 44 new licenses, or 39% of the total licenses awarded. Our ability to continually win more licenses than our current market share is a strong testament to our sales capabilities, brand awareness, and location owners believing in the Excel difference. Whether we look at the number of eligible businesses without gaming or the number of VGTs per capita, we believe Illinois still has a significant amount of highly visible growth. In Georgia, we ended the year with nearly 100 locations, and our pipeline continues to grow. We're monitoring the House and Senate bills which would legalize a prepaid debit card redemption option and remain excited about the long-term prospects for us in that market. Looking at other states, we remain cautiously optimistic that several states will consider distributed gaming in the future. This year, Four bills were filed in Missouri that are currently awaiting committee hearings. And in North Carolina, video gaming legislation is expected to be introduced in the upcoming short session. We continue to work with the various stakeholders to educate them about the benefits of distributed gaming and the incremental revenues it generates for state and local governments and small businesses alike. We are confident the growth playbook we built in Illinois can be replicated in any future market, and our leadership position nationally will create advantages for us. Overall, Excel is in a very strong position to capitalize on the future. Our hyper-local business model, low capital requirements, and highly visible growth offers one of the best returns in gaming. With that, I'd like to turn it over to Brian to walk you through the numbers in more detail.