Hello everyone. Thank you for joining today's Accel Entertainment Q1 2024 Earnings Call. My name is Sierra and I will be your moderator. All lines will be muted during the presentation, and there will be a chance for questions and answers at the end. I would now like to hand the conference over to our host, Derek Harmer.

Welcome to Accel Entertainment's first quarter 2024 earnings call. Participating on the call today are Andy Rubenstein, Accel's Chief Executive Officer; and Mat Ellis, 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. 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 Andy.

Thanks Derek and good afternoon everyone. Thank you for joining us for Accel's first quarter earnings call. I'm pleased to report we once again had a strong quarter. We reported revenue of $302 million, a year-over-year increase of 2.9% and adjusted EBITDA of $46 million, a year-over-year increase of 0.3%. Similar to other companies in Illinois, we saw negative same-store sales growth, primarily due to unfavorable weather, especially in January. However, adding new locations in Illinois and Nebraska allowed us to grow revenue overall. Our location partners recognize the value we provide and rely on the incremental revenues our convenient, high-quality offering brings to their businesses. On the expense side, we continue to optimize our operations, which has helped us maintain a stable cost structure, despite inflationary impacts. Our highly variable cost structure allows us to quickly adjust to any changes in the economy. Looking at future growth, our pipeline remains more active than ever as we evaluate multiple opportunities across the country. We are working hard to get the right opportunities across the finish line and look forward to sharing them with you in the near future. We are also optimistic about the opportunities in the markets where we are currently operating. Our strong balance sheet, proven business model, and consistent growth offer one of the best investments in gaming. With that, I'd like to turn it over to Mat to walk you through our financials in more detail.

Thanks Andy and good afternoon everyone. For the first quarter, we had total revenue of $302 million, a year-over-year increase of 2.9% and adjusted EBITDA of $46 million, a year-over-year increase of 0.3%. As of March 31st, we had 25,321 terminals and 3,987 locations. Year-over-year increases of 5.6% and 5.1%, respectively. Location attrition continues to remain low and is mostly attributable to our lowest performing locations closing their doors. Capital expenditures for the first quarter were $21 million cash spend. The increase was attributable to payments of outstanding invoices from last year. As a reminder, the primary driver of our elevated CapEx was the introduction of four new high-performing gaming terminals at the same time in Illinois. In the past, we would normally see one high-performing cabinet released every 12 to 18 months. We view last year and this quarter's CapEx as one-time in nature. For 2024, we are still projecting CapEx to be between $55 million and $65 million, a decrease of more than 20%. Over the longer term, we expect CapEx to decrease even further. At the end of the first quarter, we had approximately $286 million of net debt and $553 million of liquidity, consisting of $254 million of cash on our balance sheet and $299 million of availability on our credit facility. On our capital allocation strategy, we continue to make progress on our $200 million share repurchase program. During the quarter, we repurchased 600,000 shares at an average purchase price of $10.60 a share for a total of $6 million. We are almost 60% through the repurchase program with 12 million shares repurchased at a cost of $124 million. With our strong balance sheet and low leverage, we are in a unique position where we can grow our business and return capital to shareholders. With that, I'd like to turn it back over to Andy.

Thanks Mat. We're pleased with another strong quarter and remain focused on executing our growth strategy to create value for our investors. We're confident that our turnkey full-service local gaming solutions provide a platform to continue to produce strong and consistent results. Our focus is to provide unmatched customer support, guidance, and expertise so our location partners can grow their businesses. We will now take your questions.

Thank you. We will now begin the Q&A session. Our first question today comes from Chad Beynon with Macquarie. Please proceed.

Afternoon Andy, Mat. Thanks for taking my question. Wanted to start with just kind of the legislation landscape, places like Virginia, North Carolina, Georgia, et cetera, not necessarily for 2024, but kind of where things are shaping up and if you think any of these have a decent probability of passing something favorable for your business in 2025? Thanks.

Thanks, Chad. This is Andy. Regarding the states you mentioned, Virginia has pending legislation that is unlikely to pass this year, but there needs to be action taken due to the existing equipment in the field and the governor's intention to address the illegal industry. While I can't predict if 2025 will be the year for change, there is some probability, albeit low, as the legislation is challenging. However, there have been a number of bills introduced in recent years, highlighting the need for action. In Georgia, recent legislation has solidified the gift card as a redemption option, which may signal a shift towards a cash-out environment similar to Illinois. While I don't expect that to materialize in 2025 or 2026, it is a positive development. North Carolina is still in session, and though we came close last year, we haven't seen much progress this year. There is momentum due to the existing equipment and governmental opposition to the illegal market, making it more likely that this year's legislation will exclude casinos, which could improve the chances, though overall I remain cautious. Pennsylvania is facing a similar situation as North Carolina and Virginia, with little progress made. For anything to happen, there needs to be a motivating factor since many seem content with the current situation. So, I believe there's less than a 50% chance of any significant changes in the next two years. However, there are states that have reasons to pursue legislation that would allow VGTs or a regulated skill game environment, and we are actively monitoring this. We are prepared to expand our efforts and engage with the gift card initiative in Georgia, which could benefit our business, though the extent remains uncertain.

That's great. Thanks for running through that Andy. And then just in terms of what you're seeing with the consumer in your establishment, so the revenue growth was stronger than, I guess, what we've seen in a lot of weather-impacted markets and kind of what we've seen from other operators in the first quarter, that would tell me that the February-March, I guess, exit rate was fairly stable or maybe even healthy, I would say. Is that kind of what you were seeing in your establishments? Were you pretty happy with how the business recovered throughout the quarter after a tough January?

Yes, there was a significant recovery after a challenging start to the year. This gives us confidence in our position within the gaming industry, as we offer gaming entertainment that is readily accessible and requires minimal investment. Customers don’t need to travel far or make large commitments to participate. As interest shifts away from destination gaming and regional casino nights decline, customers are drawn to us, enjoying a consistent experience. We provide dependable entertainment daily or weekly, and we tend to perform well across various economic conditions; the only question is to what extent.

Thank you very much.

Thank you.

Our next question comes from Steve Pizzella with Deutsche Bank. Please proceed. Steve, your line is now open.

Can you hear me now?

Yes.

Hey Steve.

Hey Mat, Andy. Thanks. Good evening everyone. Just wanted to ask from an M&A perspective, what's kind of holding back deals from getting to the finish line? And what geographies have you guys been looking at?

So, I don't know if there's anything that's been holding them back. We take a very disciplined approach going through diligence, making sure that any regulatory questions are answered prior to closing. And I believe that some of the things that we're pursuing will get there. It's just more important to us to get there in a very confident way, minimizing any future risk and to fully understand the business and the potential revenue and then make sure it's priced accordingly. So, these opportunities are we believe are going to be significantly accretive to the business, but we've been doing a lot of work to make sure they're the right type of opportunities for Accel to expand. And as far as geographically, as being a national company, it's not just one market or one area of the country that we're looking. I would expect us to be involved in multiple markets by the end of the year with some of these opportunities that we've talked about, and we're excited to share that with you when they get to the finish line.

Okay. Thanks. And then always nice to see revenue growth in Illinois, even when location hold per day is down year-over-year, driven by the actual location growth. Can you give us any color on the pipeline you have for location growth moving forward, whether in Illinois or some of your other states? And how we should think about that for the remainder of the year?

We continue to see opportunities as establishment owners consistently choose us over competitors, allowing us to excel in sales across various states including Illinois, Montana, Nevada, and Georgia. This trend is expected to persist moving forward. While we do encounter business owners whose establishments may close, we are actively enhancing our portfolio, and the overall quality of the locations we acquire significantly outweighs any losses. We are witnessing ongoing improvements in the portfolio. Since we've experienced some softness in certain locations, we will be more cautious about adding new ones. It's important to ensure that new locations generate enough revenue to support their cost structures, especially as labor costs and material expenses rise, which influence other businesses more than ours. Hence, we are adjusting our approach to signing new locations.

Okay. Thanks. And then just one more for me, if I may. The Nevada location hold per day, it was just slightly negative year-over-year in the quarter. Is there anything you're seeing in that market to highlight? And how should we think about that moving forward?

Thanks Steve, this is Mat. I think similar to what Andy said earlier, players push to our local close to home offering, and there's a very local regional offering there as well. But we don't see anything systemic. I think demand is still there. You look at that overall locals market. I think we're on the better end of that spectrum. And it's just, again, our offering improves, especially we're able to make smart investments in that market with our locations. So, obviously, I would love to see it up. But I think with what you're seeing, again, it highlights that close-to-home convenient offering, the whole concept of 10 minutes door-to-door versus a much further journey to something else.

Okay, appreciate it. Thanks guys.

Thank you.

Thank you all for your questions. There are currently no questions waiting. It seems we have no further questions. So, I will pass the conference back over to Andy Rubenstein for closing remarks.

Thank you, everyone for joining us today. As a reminder, the Accel Entertainment Annual Meeting is tomorrow. I'm hoping everyone will be able to join us. We had a very good first quarter despite a rough start. We're excited one month into the second quarter. And we look forward to sharing more and more news about the growth of Accel on next quarter's call. So, thank you and I hope all of you enjoy the Mother's Day weekend.

That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.