Accel Entertainment Soars to New Heights in Q1 2025: A Strategic Growth Play?

Accel Entertainment Inc (ACEL) delivered a standout quarter in Q1 2025, reporting its highest quarterly revenue since going public and signaling a new phase of strategic growth. The company’s earnings call, released on May 5, 2025, highlighted record financial performance, operational expansion, and the successful execution of its distributed gaming model. Here’s why investors should take notice.

Financial Highlights: A Quarter of Momentum

Accel’s Q1 2025 revenue hit $344 million, a 7% year-over-year increase, driven by strong performance across key markets like Georgia, Nebraska, and its flagship Illinois operation. Adjusted EBITDA rose 7% to $50 million, reflecting improved margins. While net income dipped slightly to $14.6 million (up 97% from 2024 due to lower tax rates), the focus remains on long-term growth.

Investors rewarded the results, with shares climbing 4.74% in after-hours trading to $11.26—a clear vote of confidence despite a slight miss on earnings per share ($0.17 vs. estimates of $0.24).

Operational Expansion: Locations, Terminals, and New Markets

Accel’s distributed gaming network continues to grow. The company now operates 4,391 locations and 27,180 terminals, representing 2.9% and 4.4% year-over-year increases, respectively. Notably, the recent acquisition of Louisiana’s Kucan Gaming added 96 locations and 614 terminals, immediately contributing $9 million in revenue.

The Fairmount Park Casino & Racing in Illinois—a $125 million racino acquired in 2024—also began contributing to results in Q1, despite weather-related setbacks during its launch. CEO Andy Rubinstein called it a “meaningful growth driver,” emphasizing its potential to attract customers through integrated gaming and horse racing.

State-Specific Performance: Winners and Losers

• Georgia and Nebraska: These emerging markets delivered 64.8% and 23.9% revenue growth, respectively, showcasing the power of Accel’s distributed gaming model.
• Illinois: The core market grew 3.8% to $233.5 million, underlining its stability.
• Nevada: A 5.3% revenue decline due to the loss of a key customer post-ownership change. Management plans to offset this with optimization efforts.

Capital Allocation: Balancing Growth and Shareholder Returns

Accel spent $27 million in Q1 2025, a 30% year-over-year increase, to fund Fairmount Park’s Phase 1 and Louisiana integration. Full-year CapEx is expected to reach $75–80 million, with post-2025 spending projected to drop to $40–45 million annually, freeing up cash for other priorities.

The company also returned capital to shareholders, repurchasing $10 million in stock in Q1, part of its $154 million buyback program. With $422 million in liquidity, management has flexibility to pursue acquisitions or further expansion.

Management’s Vision: Beyond Q1

CEO Rubinstein emphasized the importance of operational discipline, citing plans to optimize underperforming locations and expand into new markets like Pennsylvania. CFO Matt Ellis (outgoing) highlighted the strength of Accel’s balance sheet, noting that the company’s net debt of $309 million remains “conservative” and supportive of growth.

The transition to acting CFO Mark Phelan appears smooth, though the steel price risks tied to Fairmount Park’s Phase 2 construction—a potential $10 million cost—add a layer of uncertainty.

Risks on the Horizon

• Steel Costs: Phase 2 of Fairmount Park faces headwinds from tariff-driven steel price increases, though 80% of CapEx is already locked in.
• Market Saturation: Legacy markets like Nevada may struggle as mature markets face competition or regulatory shifts.
• Weather and Execution: Fairmount’s success hinges on consistent attendance, which could be volatile if events like horse races are disrupted.

Conclusion: A Bullish Outlook with Caution

Accel’s Q1 results mark a pivotal moment. The company has built momentum through disciplined expansion, strong execution in core markets, and a high-margin distributed gaming model. With Fairmount Park’s potential and a $422 million war chest, Accel is well-positioned to capitalize on growth opportunities.

However, investors must weigh the risks. While the stock’s post-earnings rally suggests optimism, the path to sustained growth will depend on mitigating steel costs, stabilizing Nevada performance, and leveraging Louisiana’s untapped potential.

For now, Accel’s Q1 2025 results are a clear win—a testament to its ability to innovate and scale. With the stock trading at $11.26, and forward momentum intact, this could be an intriguing entry point for investors willing to bet on its long-term strategy.