Accel Entertainment, Inc.

Ladies and gentlemen, please remain holding. The conference will begin shortly. Again, please remain holding. The conference will begin momentarily. Good afternoon, thank you for attending today's excel entertainment Q2 2024 earnings call. My name is Tamia and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to your host, Derek Harmer, General Counsel and Chief Compliance Officer.

Welcome to Accel Entertainment's second quarter 2024 earnings call. Participating on the call today are Andy Rubenstein, Accel's chief executive officer, Matt Ellis, Accel's chief financial officer, and Mark Phelan, Accel's president of US 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 Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward-looking statement section of the earnings press release available on our website as well as other risk factor disclosures in our filings with the SEC. Any projected financial information presented in this call is for administrative 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. I will now turn the call over to Andy.

Thank you, Derek, and good afternoon, everyone. Thank you for joining us for Excel's second quarter earnings call. This is a very exciting time here at Excel. First off, we have another record-breaking quarter. We reported revenue of $309 million and adjusted EBITDA of $50 million, positive proof of the strength of our convenient local gaming offering. Secondly, we announced our pending acquisition of Fairmont Park, which Mark will discuss in more detail shortly. In terms of financial performance, our home market in Illinois posted market-wide GGR growth of 5% year-over-year, and Accel outperformed that. growing revenues by 6%. This is in stark contrast to Illinois casinos, which were flat year over year. We're proud of the strong foundation we've built in our home state, leading in a model that's a win-win-win for our state, our customers, and gaming providers like us. We added almost 50 locations nationwide this quarter, highlighted by 30 in Illinois and 11 in Montana. This is another way we differentiate ourselves from traditional casinos, unit growth. This unit growth was in addition to positive same-store sales growth in Illinois, Montana, and Nebraska, which was primarily driven by increased demand in our offering, new machines, and favorable weather. In Nevada, we saw a modest decline in same-store sales due to an overall increase in supply in the greater Las Vegas locals market. turning to expenses. Earlier this year, Illinois raised the state gaming tax from 34% to 35% effective July 1st. The increase is split evenly between us and our location partners. Based on our highly variable cost structure, we will hopefully offset most of the increased expense. On a regulatory front, we're seeing signs Illinois will implement Ticket In, Ticket Out, known as TITO. which should make cash processing more efficient, and more importantly, create a more convenient experience for our players, allowing them to switch between games in our venues without cashing out and cashing in each time. We expect Cheeto to be rolled out in the next 18 months. Before I turn it over to Mark, I want to take a few minutes to talk about Excel's value proposition and where we see our greatest opportunities. We provide a high quality slot gaming experience at a low price point that can be accessed by our players at a local, convenient retail location of their choosing, oftentimes 15 minutes or less. We support our retail gaming partners by providing them with high margin revenue per square foot gaming products and self-service technology. We instill player loyalty through our rewards programs and create memorable player experiences with our diverse game selection. And finally, we maintain collaborative and reliable partnerships with regulators across 11 different regulatory structures, all while generating attractive returns on capital in the low teens. In our core route-based business model, our steady-state growth algorithm is both simple and compelling. We target low single-digit revenue growth, mid single-digit EBITDA growth, and high single-digit free cash flow growth, and core business CapEx quickly compressing down towards our annual depreciation of $40 million. Looking ahead, the primary levers for growth in our core route business are one, growing organically in Illinois, Nebraska, and Georgia. through both newly licensed establishments and converting competitor locations. Two, collecting a greater share of location economics through selectively owning establishments in markets where this is permitted and is otherwise profitable. Three, driving profitability in Nebraska and Georgia through operational execution and strategically positioning ourselves in the face of favorable legislation. And four, preparing ourselves for future opportunities in new states likely to legalize local gaming in the future. Outside of our core business, our M&A pipeline remains active, as demonstrated by the Fairmont announcement. We are confident that we can leverage our proven capabilities as a local gaming operator to convert opportunities in the attractive and sizable $15 billion GGR local gaming market. Most assets in this market are unconsolidated and sit at even levels that are below the radar of larger gaming companies, conditions that play to our strengths. As a prime example of these opportunities, I'm going to turn it over to Mark.