Good day and thank you for joining us. Welcome to the Accel Entertainment Q2 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the presentations, there will be a question-and-answer session. I will now turn the call over to Mr. Mathew Ellis, Senior Vice President of Corporate Strategy.

Welcome to Accel Entertainment's second quarter 2021 earnings call. Participating on the call today are Andy Rubenstein, Accel's Chief Executive Officer; and Brian Carroll, Accel'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 & 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 related 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 statements 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 Rubenstein.

Thanks, Matt. Good morning, everyone. Thank you for joining us for Accel's second quarter earnings call. I'm pleased to report the second quarter of 2021 was the best quarter in Accel's history. We set new revenue and adjusted EBITDA records. As discussed during our June Investor Day, the primary drivers of the higher revenue were the completion of higher bet limit software upgrades and the 6 VGT installations. The combination of these initiatives contributed to the increased location revenue, on average between 30% and 35% versus 2019 levels. We also benefited from the third round of stimulus checks and higher demand due to the lack of other entertainment options, as the economy was not fully open. But the improvements in our product offering were the critical drivers for this strong performance. As we enter the summer months and Illinois fully reopened, we watch revenue closely to see where it would settle. February, March and April are traditionally the three best months of the year, while June and July are lower-performing months. I'm pleased to share that our July gaming revenue was seasonally better than normal and above our previous expectations. This reinforces our belief that the elevated revenue we are seeing was driven by the initiatives and may be sustainable. Due to Q2's strong results and the strong start to Q3, we are raising our guidance. I'll leave it to Brian to walk you through the new numbers later in the call. Turning to growth. Our sales teams continue to sign additional competitor and organic locations, including the most recent IGB meeting on July 14. Year-to-date, Accel was awarded 168 or 38% of all new licenses. Our ability to win more licenses than our current market share is a strong testament to our sales capabilities and is just one of many competitive advantages that differentiate us from other operators. There have been some questions about the relatively low number of licenses issued at the last gaming board meeting in July. However, when looking at the calendar, there was a short amount of time between meetings in addition to the July 4 holiday weekend. We will always push ourselves to win more than our share and help our local business partners generate incremental profits, which will lead to further location growth. It's too soon to determine what the new total number of annual licenses will be going forward, but we will see a significant amount of runway in Illinois, as illustrated in our June Investor Day presentation. Looking at other states, we remain cautiously optimistic that several states will consider distributed gaming in the future. For example, Virginia recently banned unregulated devices, which could be a first step towards regulated gaming. We will continue to work with the various stakeholders in these states to educate them about the benefits of distributed gaming and the incremental revenues it generates for state and local governments, as well as small businesses. Should new states legalize gaming, we believe our growth playbook in Illinois will enable us to be successful in any future market. On the M&A front, our pipeline remains active and we expect to announce more opportunities in the future, in both existing and incremental states. In Georgia, we completed another acquisition in May when we acquired Island Games, a Southern Georgia operator, with 30 locations. Today we have approximately 60 live locations in Georgia and a backlog of over 100 locations. We expect both numbers to continue growing and we remain excited about the long-term prospects for us in that market. Switching to Century, which operates in Montana, Nevada, South Dakota, West Virginia and Louisiana. We have now submitted all our applications to the various regulators. Due to the large backlog of applications in various states, we will likely not be approved until the first half of 2022, which will impact the timing of the closing versus our initial expectations. We are happy to report that Century continues to perform better than our original estimates and both sides are excited to combine the best practices of both companies. Overall, Accel is in a strong position to capitalize on the future. We believe we will offer one of the best returns in gaming, combined with highly visible growth. To put our growth into context, Illinois distributed gaming industry's revenue grew 60% from Q2 2019 to Q2 2021, as compared to Illinois casinos revenue, which decreased 7% over the same period. Over that same period, Accel's growth was 92% overall or 67% when normalized to the Grand River acquisition. With that, I'd like to turn it over to Brian to walk you through the numbers in more detail.

Thanks, Andy and good morning, everyone. Please remember that we were shut down in the second quarter of 2020, so I will omit prior period comparisons where appropriate or make comparisons to the second quarter of 2019. For the second quarter, we had total revenue of $202 million and adjusted EBITDA of $43 million. Revenue per location per day for the second quarter was $855, an all-time high for Accel and an increase of 35% compared to the second quarter of 2019. As Andy discussed earlier, the primary drivers of the increase were the higher bet limit software and our 6 VGT initiative in addition to some overall higher demand partially driven by the third round of stimulus checks. CapEx for the second quarter was $9 million cash spend. A portion of this was related to some deferred payments in the first quarter due to the partial shutdown. As of June 30, we had 13,177 VGTs in 2,527 locations, year-over-year increases of 19% and 8% respectively. Location attrition continues to remain low and mirror the pre-COVID historical averages. It is our belief that businesses with incremental gaming revenues had a lower failure rate as compared to businesses without. As of June 30, we have largely completed the installation of the higher bet limit software and the 6 VGTs across our footprint. We believe that second quarter results highlight the positive impact of both initiatives. To refresh everyone's memory, the rollout of the 6 VGTs started in January 2020 and the rollout of the higher bet limit software started in July 2020. At the end of June, our average residual contract length was approximately 6.8 years, the same length as last year and a small increase compared to last quarter. Our ability to maintain and even raise the residual contract length is a true testimony to the hard work of all our teams, including service, collection, marketing and relationship management. We have always believed our people give us a competitive advantage and we'll continue to invest in them to deliver the best-in-class experience for our customers, locations and players. At the end of the second quarter, we had approximately $167 million of net debt, down $20 million from Q1 and $266 million of liquidity consisting of $179 million of cash in our balance sheet and $87 million of revolver availability. As Andy mentioned earlier, we are raising our outlook. However, due to the uncertainty of the delta variant, we have decided to do so conservatively as follows. We are now forecasting to end the year with 13,555 to 13,680 VGTs and 2,590 to 2,615 locations. Revenue for 2021 is now expected to be $700 million to $725 million with adjusted EBITDA of $133 million to $138 million. CapEx is still expected to be $20 million to $25 million cash spend. Year-end net debt excluding any acquisition financing should be approximately $123 million to $128 million, implying a year-end trailing debt-to-EBITDA multiple of only 0.9 giving us ample firepower to pursue additional inorganic and greenfield opportunities. Remember, our annual guidance for 2021 includes the impact of a lower-than-normal Q1 given the COVID shutdowns in place to start the year. Back to you, Andy.

Thanks, Brian. We're extremely pleased with our performance this quarter and even more excited for what the future holds. It is important to remember that our product today is substantially better than it was in 2019. And that is reflected in our recent results and outlook. We have newer cabinets, better software, higher jackpots, and our locations continue to invest in natural gaming areas given the strength and importance of the incremental revenues we help them generate. We are watching the delta variant closely and hope it has a minimal impact, including on our players, customers, and Accel employees. We remain confident that our asset-light hyper-local business model creates a platform to outperform in difficult times and really drive under normal circumstances as demonstrated by our recent results. We aim to leverage our differentiated operating model and extremely strong financial position in order to continue our expansion both in Illinois and across the country. Our success would not be possible without our dedicated employees and loyal customers. They are the true competitive advantage of our business that make Accel the preferred choice in distributed gaming. We will now take your questions.

Your first question is from Omer Sander from JPMorgan. Your line is open.

Hi, Andy, Brian, Matt. Congrats on the strong results and thanks for taking the question. If I heard correctly, you're mostly done with the rollout of 6 VGTs. As you look through your portfolio does the focus now shift towards replacing some of the underperforming units both at the existing and the acquired locations? I guess, the question is how do you think about that opportunity?

Thank you, Omer. We look at the opportunity to replace equipment on a constant basis. It's something that we do literally weekly evaluating underperforming equipment in specific locations where maybe in that particular micro market, a certain piece of equipment is desired, and we therefore look at what is the demand in that market from the player, and then we often shift equipment in there. So it's a constant process we do. We keep a significant inventory of equipment in our warehouse. So we're not having to wait to replace the equipment or update it. So it's an ongoing process and it's something that we do as a company to optimize the performance for our establishment partners.

Okay Thanks. Are there regions or a portion of the portfolio that may be underperforming or under indexing relative to the broader part of the portfolio?

Yes. I mean the state of Illinois has many different demographics. And there's obviously stronger income levels and stronger demand in certain markets as opposed to others, and that may be because there's a lack of alternative entertainment options. It's been one area versus others. As an example, the Peoria area, because there's a casino that's very close to a lot of the establishments, performs at a lower level than some of the northern suburbs of Chicago where there are not quite as many casinos, and then there are stronger income levels.

Awesome. That's helpful. Thank you. And then maybe just a follow-up question. You kind of touched on it in your prepared remarks in terms of the new license issuances which also unsurprisingly dipped last year due to COVID. Do you get the sense that there is maybe a desire to catch up on your organic commission front and the need to generate tax revenues?

To be honest, I don't know exactly their motives, but they have done their best to go through and authorize as many applications as possible. Even in today's environment, they're somewhat restricted due to their workloads, and they've got a tremendous amount of workload with the new casinos that they're still trying to authorize or review the applications. So our gaming board has done the best they can with the staffing that they currently have. They're not staffed to take on a bunch of new casinos plus a rapidly growing industry at once. They're on a normal staffing level. And the additional casino expansion is definitely putting strains on some of their resources.

Thanks so much. Appreciate the color.

Your next question is from Greg Gibas from Northland Securities. Your line is open.

Hey good morning Andy, Brian. Thanks for taking the questions and congrats on the quarter. A couple of follow-ups. I guess first as we see new state markets legalize video gaming, what kind of gives you new confidence that Accel can get early player operator in those markets?

Greg, as we look at these markets, a lot of them were pretty active in working with the legislators or working with the local business partners in those markets. We historically have been a great business partner to the local operators in markets. And we think that historical success and that reputation of being a good business partner, whether it's to the establishment or to the local operators, will continue to be our kind of secret to success. And as we've gone into some of these markets already, we've been able to establish great partnerships. And I think it will play out with a position of market leadership as the market opens up, as we've demonstrated over the last 10 years that Accel can continue to thrive in dynamic markets.

Great. Appreciate that. And to follow-up, Andy, you talked about seeing a good number of M&A opportunities that you mentioned. I wanted to ask, I guess, are those mostly Illinois-focused, or are they new markets focused? And then maybe how have those opportunities changed since the last couple of quarters? Are you seeing more, or is it maybe a little harder to find opportunities now that we're a little bit more out of the pandemic? How are those trends?

The first part of the question is we continue to look at Illinois opportunities, but our focus has really broadened into new and legacy markets. And I think to the second part of your question, those opportunities are as good or better than they were a few quarters ago. The uncertainty during the height of the pandemic created a pause for many operators or potential business partners. And as there's greater visibility to their earnings or greater visibility to their potential, both parties are more easily able to come to an agreement on what a partnership would look like. So, I think you'll see us continue to pursue opportunities in Illinois and outside in these other states, and I think it will probably be at an accelerating rate in the next few years.

Awesome. Great. Well, that's all I had. I just wanted to congratulate on your license wins too. I mean, the 38% of the state, that's impressive, but I'll pass it on. Thanks.

Thank you. Your next question is from Steve Pizzella from Deutsche Bank.

Hey guys, thanks for taking the question. Margins were pretty impressive for the quarter. Can you talk about what you're doing on the cost side and the level of sustainability for these levels moving forward?

Yes. Thanks Steve. A lot of the results were due to obviously increased revenues. So the incremental revenues come at a much higher margin. On the cost side, we haven't been in a cost-cutting mode. We're more in a growth mode, and we are continuing to invest in systems and people to ensure that we can grow both same-store sales as well as future opportunities. I think the margins will probably kind of move more toward the high 19s, low 20s, as we get into a more sustainable revenue performance. So, I think you'll see that the investment in order growth will bring those margins kind of down a point or so, but it will also ensure that we will have the growth that we've demonstrated in the past and we expect to do in the future.

Okay. Great. Thank you. That's helpful. And then now that you've been in Georgia for about a year now, can you talk about what you've learned in the market and how big you view the opportunity to be there?

So Georgia has been an interesting year. We feel very strongly that it can be a very successful market on a long-term basis. And we've invested in building our infrastructure, working with the state on a pilot where you can use a redemption part. And where we've seen that redemption card in the pilot, it's made significant improvements in performance or play at those establishments. So we're very excited and hopeful of the expansion of the redemption card. I think on a long-term basis, the market can be meaningful in the overall Accel portfolio.

Okay. Appreciate it. Thanks guys.

Your next question is from Jordan Bender from Macquarie.

Good morning. Good afternoon guys. Thanks for taking the question. With respect to your guidance, I guess, you have July in the books here. I was wondering if you could kind of give the puts and takes on what it might take to hit the bottom or the top half of your guidance range for revenue for the year?

Yes. Thank you, Jordan. I'll ask Brian to take this one.

Thanks, Andy. Currently, our revenue run rates suggest we will be on the higher side. The timing for hitting the lower side depends on our investment strategy. As Andy mentioned, this includes our efforts in building the Illinois infrastructure and developing our national platform. Based on these run rates, we noted earlier that we are taking a slightly conservative approach with our guidance, and there is potential for upside. However, I want to evaluate it month by month and see how everything unfolds.

Okay. And then as my follow-up here, you've mentioned it in your prepared remarks the backlog is pretty strong right now. I was wondering if you could just give us color on kind of where it sits now versus maybe at the end of 1Q or even faster levels like in 2019 or so?

Yes, I would say that we're actually gaining momentum with our backlog. This is partly because we are seeing businesses starting to reopen for new ownership in places that have closed, as people have moved past concerns about the long-term effects of the pandemic. I believe we have a good 12 months of building the backlog ahead of us. You will notice strength in the increase of the locations we have under contract, and I think we will reach levels that are probably closer to those of 2019.

Okay. Thanks guys. Nice quarter.

Thank you.

All right. And I'm showing no further questions at this time. I would like to turn the call back over to Mr. Andrew Rubenstein for any additional or closing remarks.

Yes. Thank you everyone for joining us today, and as we look forward, we are optimistic about the continued growth of Accel. Obviously, from a personal perspective, as well as for everyone, we're concerned about the delta variant and how it's going to affect the economy. We will continue to take precautions to make sure our employees are in the best of health, and we hope that everyone does their best to ensure the economy continues to move forward. So, thank you again.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and have a great day.