10-K: Accel Entertainment Reports 2024 Results, Revenue Climbs Amid Strategic Expansion

Accel Entertainment's 2024 annual report reveals revenue growth driven by increased gaming locations and strategic acquisitions, including FanDuel Sportsbook and Horse Racing.

Summary

• Accel Entertainment's total net revenues for 2024 reached $1,231.0 million, a 5.2% increase compared to the previous year, primarily driven by a 5.3% increase in net gaming revenue.
• The company operates in Illinois, Montana, Nevada, Nebraska, Georgia, Iowa, Louisiana and Pennsylvania.
• The number of locations increased by 3.9% to 4,117, and the number of gaming terminals increased by 5.0% to 26,346.
• The company acquired Fairmount Holdings, Inc. (FanDuel Sportsbook and Horse Racing) in December 2024, expanding into local casino gaming and horse racing.
• Adjusted EBITDA for 2024 was $189.1 million, a 4.2% increase compared to the prior year.
• The company had total indebtedness of $597.4 million as of December 31, 2024, and $143.5 million of availability under its credit agreement.
• The company's Board of Directors approved an amendment to the share repurchase program to replenish the dollar amount that may be purchased under the program back to up to $200 million shares of Class A-1 common stock.
• The company plans to open a casino at the FanDuel Sportsbook and Racktrack in the greater St. Louis/southern Illinois market in 2025.

Sentiment

Score: 6

Explanation: While revenue and Adjusted EBITDA increased, the decrease in net income and operating income, along with increased expenses, tempers the positive outlook.

Positives

• Revenue growth driven by increased gaming locations and terminals.
• Strategic acquisitions, including FanDuel Sportsbook and Horse Racing, expanding operations.
• Adjusted EBITDA increased, indicating improved profitability.
• Strong cash position with $281.3 million in cash and cash equivalents.
• Share repurchase program indicating confidence in the company's future prospects.

Negatives

• Operating income decreased by 15.4% to $90.9 million.
• Net income decreased by 22.6% to $35.3 million.
• Increased interest expense, net, by 8.3% to $35.9 million.
• Increased other expenses, net, by 199.7% to $19.3 million.
• Loss on change in fair value of contingent earnout shares increased to $1.3 million.

Risks

• The company's operating results are likely to vary significantly and be unpredictable.
• The company's success depends on its ability to offer new and innovative products and services.
• The company is dependent on relationships with key manufacturers, developers, and third parties.
• The company's future results may be negatively impacted by slow growth in demand for gaming terminals.
• The company depends heavily on its ability to win, maintain, and renew contracts with location partners.
• Adverse economic conditions may negatively impact the company's business.
• The company's ability to operate in existing markets or expand into new jurisdictions could be adversely affected by difficulties in obtaining licenses.
• The company's business is geographically concentrated, which subjects it to greater risks from changes in local conditions.
• The company is subject to strict government regulations that are constantly evolving.
• The company's success depends on the security and integrity of its systems and products.
• The company's level of indebtedness could adversely affect its results of operations.
• Certain stockholders own a significant portion of common stock and may have interests that differ from those of other stockholders.

Future Outlook

The company plans to open a casino at the FanDuel Sportsbook and Racktrack in the greater St. Louis/southern Illinois market in 2025, with Phase I opening in the second quarter of 2025.

Industry Context

The company operates within the U.S. distributed gaming industry, which is experiencing increasing acceptance and potential expansion in various states.

Legal Proceedings

• The company is involved in an administrative hearing process with the IGB related to certain alleged violations of the Video Gaming Act and related rules.
• The company is involved in several lawsuits, including matters related to employee matters, alleged product and system malfunctions, alleged intellectual property infringement and claims relating to contracts, licenses, acquisitions and strategic investments.

Stakeholder Impact

• The company's performance impacts shareholders through stock value and potential dividends.
• Employees are affected through compensation, benefits, and job security.
• Location partners benefit from the company's services and revenue sharing.
• Customers (players) are impacted by the availability and quality of gaming and entertainment options.
• Suppliers are affected through procurement relationships.

Next Steps

• Open Phase I of the casino at the FanDuel Sportsbook and Racktrack in the second quarter of 2025.
• Begin Phase II build out of a permanent facility shortly after the completion of Phase I.
• Operate the 2025 racing season from April to October 2025.

Key Dates