Accel's Q3 2025 Earnings Call: Contradictions Emerge on Tito Impact, Fairmount Expansion, and M&A Strategy

Date of Call: November 4, 2025

Financials Results

• Revenue: $330M, up 9.1% YOY

Guidance:

• Full-year 2025 capital expenditures affirmed at $75 million to $80 million.
• Company expects steady top-line growth and improving returns into 2026 as investments and market ramps continue.
• Will allocate free cash flow case-by-case to highest ROI uses (bolt-on M&A, selective transformational deals, debt paydown, or buybacks).

Business Commentary:

* Revenue Growth and Market Expansion: - Accel Entertainment reported total revenue of $330 million for Q3, up 9.1% year-over-year. - Growth was supported by higher gaming terminal counts, stable machine performance, and improved efficiency in capital deployment across markets like Illinois, Montana, and developing markets such as Nebraska and Georgia.

• Adjusted EBITDA Increase:
• The company's adjusted EBITDA grew to $51 million in Q3, up 11.5% year-over-year.

• The increase was driven by top line growth and strong cost discipline, indicating operational efficiency and strategic capital allocation.

• Illinois Market Performance:

• In Illinois, revenue increased by 7% year-over-year to $239 million.

• Growth was driven by same-store performance, new machine placements, and a focus on higher-yielding locations, reflecting Accel's disciplined capital management and optimization strategies.

• Developing Markets' Profitability:

• Nebraska and Georgia experienced strong double-digit revenue growth, contributing significantly to Accel's overall revenue.

• This growth was driven by location expansion and market share gains, demonstrating the company's successful scaling and profitable growth in developing markets.

• Louisiana Market Integration:

• Louisiana contributed $9 million in revenue, reflecting successful integration of the Toucan Gaming acquisition.
• The market now includes 670 terminals across nearly 100 locations, highlighting the company's effective expansion strategy and bolt-on acquisition opportunities.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "Accel delivered another strong and resilient performance." Revenue +9.1% YOY to $330M; adjusted EBITDA +11.5% to $51M; operating income +16.1% YOY. Completed $900M credit facility to strengthen liquidity and lower cost of capital.

Q&A:

• Question from Steven Pizzella (Deutsche Bank): Quarter of optimization with locations down and win per day up. How should we think about the Illinois strategy going into 4Q and 2026? And what is the potential upside from the rollout of the ticket in, ticket out from a revenue and cost standpoint?
  Response: Continue route optimization in Illinois to raise average revenue per machine with machine counts mostly stable; TITO is early (mid-single-digit usage) and expected to reach double digits by next report with material benefits likely by Q2.

• Question from Steven Pizzella (Deutsche Bank): You do have a fair amount of cash and should generate a decent amount over the next couple years — how do you think about uses of free cash flow moving forward?
  Response: Allocate cash case-by-case to highest ROI: patient approach across bolt-on and transformational M&A, debt reduction, and opportunistic share buybacks.

• Question from Samir Ghafir (Macquarie): Have you seen any shift in seller expectations over the last couple months given sector multiple compression?
  Response: No significant shift yet; sellers are beginning to recognize reduced transaction multiples but market adjustments typically lag.

• Question from Samir Ghafir (Macquarie): Nevada had a nice uptick in locations — anything specific to call out for that region?
  Response: Adding new routes including FuelBros; market share gains and recent wins indicate continued growth in Nevada.

• Question from Samir Ghafir (Macquarie): As we head into 2026, which states could make headway on route gaming expansion?
  Response: Monitoring Pennsylvania, Missouri, North Carolina and Virginia for new VGT markets; Georgia, Louisiana and Nebraska also likely to benefit from legislative enhancements.

• Question from Gregory Gibas (Northland): What's the priority for bolt-on M&A — primarily Louisiana or other markets?
  Response: Primary bolt-on focus is Louisiana to scale the recent investment; Illinois is a secondary target when pricing is attractive.

• Question from Gregory Gibas (Northland): Do you disclose same-store sales growth?
  Response: They do not disclose same-store sales growth for the quarter.

• Question from Gregory Gibas (Northland): Any change in timing or opportunity for the ongoing ramp and future development plans at Fairmount Park?
  Response: Fairmount Park is ramping with monthly adjusted GGR increasing; still in development and evaluating permanent-site options with an update possible within ~6 months.

Contradiction Point 1

TITO Impact on Earnings

It involves the expected impact of TITO implementation on earnings, which affects financial forecasts and investor expectations.

What is the Illinois strategy for Q4 and 2026, and what revenue and cost benefits are expected from the ticket-in, ticket-out functionality rollout? - Steven Pizzella(Deutsche Bank)

2025Q3: We are in the early stages of the TITO rollout, and as more machines become TITO-enabled, we should see revenue and cost benefits by Q2 2026. - Andrew Rubenstein(CEO)

What are your expectations for how TITO in Illinois will impact future earnings? - Steven Pizzella(Deutsche Bank)

2025Q2: We're early in the game with TITO. Over half of the machines have not had TITO implemented yet. We expect no material impact this quarter, but by the third quarter, we'll have more data to report. - Andrew Rubenstein(CEO)

Contradiction Point 2

Fairmount Expansion Timeline

It involves the timeline and progress of the Fairmount Park expansion, which impacts strategic growth plans and investor expectations.

Are there any updates to the timeline or changes in the Fairmount Park expansion plans? - Gregory Gibas(Northland)

2025Q3: We are in the development stage, with consistent growth in gross gaming revenue. We are evaluating options for the permanent expansion and aim to provide updates in the next 6 months. The focus remains on acquiring customers and enhancing the experience. - Mark Phelan(CMO)

When will you provide a significant update on Phase 2 timing, and where is planning spending allocated? - Gregory Thomas Gibas(Northland)

2025Q2: Phase 2 planning involves understanding the asset and interactions between buildings. We're being thoughtful and stewards of capital. We'll work with the Illinois Gaming Board to meet their timeline. Updates will follow as we learn more. - Mark Phelan(CMO)

Contradiction Point 3

Illinois Route Optimization Strategy

It involves the strategic approach to route optimization in Illinois, which affects operational efficiency and market positioning.

What are the details of Illinois strategy for Q4 and 2026, and the potential revenue and cost impacts from the ticket-in/ticket-out rollout? - Steven Pizzella(Deutsche Bank)

2025Q3: We will continue to optimize our route in Illinois, with better locations replacing those that close down. This should maintain stable machine counts while increasing average revenue per machine. - Andrew Rubenstein(CEO)

What were the key factors affecting your Illinois operations and quarterly performance amid consumer volatility? - Chad C. Beynon(Macquarie)

2025Q2: It was pretty consistent growth through the quarter. All 3 months were generally consistent with the volume. We didn't really see much of a peak or valley. - Mark Phelan(CMO)

Contradiction Point 4

M&A Strategy and Priorities

It involves differences in the company's approach to M&A, which impacts how investors view Accel's growth strategy and financial planning.

How should the company allocate free cash flow, given its significant cash reserves and planned Fairmount CapEx? - Steven Pizzella (Deutsche Bank)

2025Q3: M&A opportunities are evaluated, with a focus on bolt-on acquisitions that can be absorbed. We remain patient regarding transformational M&A opportunities while focusing on bolt-ons in growth markets. - Mark Phelan(President of US Gaming)

Will Blackwell's Q4 revenue be additive, and what is the expected gross margin exit rate? - Stacy Rasgon (Bernstein Research)

2024Q4: We will continue to evaluate M&A opportunities, particularly transformational opportunities, as we seek to further scale our business. - Mathew Ellis(CFO)

Contradiction Point 5

Louisiana Expansion and Acquisition Strategy

It involves differing perspectives on the acquisition strategy in Louisiana, which could impact Accel's growth and market position in that state.

What are the priority markets for bolt-on M&A, and are there specific targets in Louisiana? - Gregory Gibas (Northland)

2025Q3: Louisiana is our top priority for bolt-ons due to the acquisition pipeline, with a focus on scaling investments in this state. Illinois also provides opportunities for bolt-ons based on available operators. - Mark Phelan(CFO)

What are the growth opportunities in Louisiana, and will you prioritize acquisition-driven growth or organic growth? - Gregory Gibas (Northland)

2024Q4: Louisiana is both mature and fragmented, with opportunities in truck stops and bars. Accel will grow organically over time and may acquire more as ownership transitions. - Andrew Rubenstein(CEO)