good afternoon and thank you for joining the excel entertainment q4 and full year 2024 earnings call my name is kate and i will be the moderator for today's call at this time all lines are in a listen only mode and will be until the question and answer portion if you would like to queue up for a question please press star one on your telephone keypad i would now like to turn the call over to derek harmer general counsel and chief compliance officer please proceed welcome to Excel Entertainment's fourth quarter and full year 2024 earnings call.

Participating on the call today are Andy Rubenstein, Excel's Chief Executive Officer, Matt Ellis, Excel's Chief Financial Officer, and Mark Phelan, Excel's President of US Gaming. 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 and 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 more detailed discussion of these and other risk factors investors should review the forward-looking statement section of the earnings press release available on our website, as well as other risk factor disclosures in our filings with the SEC. Any projected financial information presented in this call is for illustrative purposes only and should not be relied upon as being predictive of future results. The inclusion of any financial forecast information in this call should not be regarded as a representation by any person that the results reflected in such forecasts will be achieved. 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 today's call. I'm pleased to report we had another record-setting year with total revenue of $1.2 billion and adjusted EBITDA of $189 million. Proof of the resiliency of our convenient local gaming offering. It was a busy quarter for us. We entered into Louisiana on November 1st and acquired Fairmont Park outside St. Louis on December 2nd. Our teams are hard at work integrating Louisiana and preparing for the Phase 1 opening of the Fairmont Casino in the second quarter of this year. In terms of financial performance, Illinois, our largest market, hosted market-wide GGR growth of 4% year-over-year, outperforming Illinois casinos which were down 3% year-over-year on a comparable basis. We are proud of the strong foundation we have built in our home state, leading in a model that's a win-win-win for our state our partners and local convenience-based gaming providers like us during the quarter our location count in illinois was down again sequentially this was due to the strategic closures of 16 underperforming locations without these closures our location count would have been flat for the quarter For the full year, we strategically closed 54 underperforming locations, which helped us right-size our operations in response to the 1% increase in the state gaming tax on July 1st, 2024. We expect this process to continue as we review our portfolio and look for opportunities to improve financial performance. We've identified a subset of locations within our bottom decile outperformers that we will phase out over coming quarters. Given we have an attractive pipeline of promising locations, we expect near-term Illinois net unit growth to potentially be flat, with planned positive impacts to EBITDA and greater returns on invested capital as we rotate locations. Across our footprint, we continue to refine our sales and operating model focusing on the highest hold per day locations the improvement in the composition of our portfolio will help drive both top line and bottom line growth driven by choiceful segmentation and resource allocation in addition to what i just mentioned we've leaned into our continuous process of reviewing our markets and operations to find areas of improvement as a result we've identified additional efficiencies and opportunities for growth that will result in improved performance and an increase in free cash flow. On the regulatory front, Illinois continues to lay the groundwork for Ticket In, Ticket Out, also known as TITO, which should make cash processing more efficient. More importantly, it will create a more convenient experience for our players, allowing them to switch between games in our locations without cashing out and cashing in each time, making our sites more akin to a casino experience. We're hopeful TIDA will be rolled out in 2025. We continue to monitor regulation related to this. Before I turn it over to Mark, I'm going to take a few minutes to talk about Excel's value proposition and where we see our greatest opportunities for growth. For both our customers and players, we provide a high-quality slot gaming experience at a low price point that can be accessed by our players at a local convenient retail location of their choosing in 15 minutes or less from their home. We support retail gaming partners by providing them with high margin revenue gaming products and labor light self-service technology. We instill player loyalty through our rewards programs by creating memorable player experiences with our diverse gaming selection. And finally, we maintain collaborative and reliable partnerships with regulators across 11 different regulatory structures, all while generating attractive returns on capital. In our core route-based business model, our steady growth algorithm is both simple and compelling. We target low single-digit revenue growth, mid-single-digit EBITDA growth and high single-digit free cash flow growth assuming normalized CAPEX levels which Matt will address later looking ahead the primary levels for growth in our corporate route business are one growing organically in Illinois Nebraska and Georgia through both newly licensed establishment and converting competitors locations two driving profitability in Nebraska and Georgia through operational execution and strategically positioning ourselves in the face of favorable legislation. Three, collecting a greater share of location economics through selectively owning establishments and markets where this is permitted and is otherwise profitable. And four, preparing ourselves for future opportunities in new states likely to legalize local gaming in the future. outside of our core business our M&A pipeline remains active as demonstrated by the Fairmont and Louisiana acquisitions we are confident that we can leverage our proven capabilities as a local gaming operator to convert opportunities in the attractive and sizable nationwide 15 billion dollar plus GGR local gaming market most assets in this market are unconsolidated and sit at EBITDA levels that are below the radar of larger gaming companies, conditions that play to our strengths. With that, I'm going to turn it over to Mark to provide an update on Fairmont.

Thanks, Andy. We closed the Fairmont acquisition on December 2nd for approximately $40 million in Excel stock after adjusting for working capital and the price of Excel stock at close. The acquisition includes a master sports betting license with a long-term partnership with FanDuel, a horse racetrack, off-track betting facility opportunities, and the ability to develop a best-in-class, locally-focused casino. This transaction builds on our core capabilities in local gaming that we've honed over the last 15 years with attractive returns on capital and free cash flow. We are combining our local gaming expertise with key partnerships in areas outside our core business to create an exceptional customer offering as a reminder we expect to develop this project in two phases immediately after closing we started construction on phase one of our casino which will be built in the existing grandstand with approximately 255 electronic gaming devices four electronic table games and significantly improved food and beverage amenities as of now we expect to open phase one during the second quarter of 2025 and we look forward to welcoming players once the facility is open for phase two we'll build

a permanent casino on site with detailed plans for 600 plus slot machines 24 table games food and beverage amenities and a new and improved sandal sportsbook with that i'll pass it over to matt to go over the fundamentals of the quarter thanks mark and good afternoon everyone for the fourth quarter we had total revenue of 318 million dollars a year-over-year increase of 6.9 percent and adjusted EBITDA of 47 million dollars a year-over-year increase of 6.2 percent for the full year we set a new excel record with total revenue of 1.2 billion and adjusted EBITDA of 189 million year-over-year increases of 5.2 percent and 4.2 percent respectively as of december 31st we had 26 346 terminals in 4 117 locations year-over-year increases of five percent and 3.9 percent respectively revenue per location for the quarter in our core states was as follows. Illinois was $868 per day, an increase of 3.5% year-over-year. Montana was $614 per day, an increase of 4.6% year-over-year. Nevada was $786 per day, a decrease of 6.7% year-over-year. Nebraska was $253 per day, an increase of 5.9% year-over-year. and Louisiana was $979 per day. The increases in Illinois, Montana, and Nebraska really emphasize the strength and resilience of both our business model and, more importantly, consumers who continue to choose our high-quality, local, and convenient offering. Capital expenditures for the fourth quarter were $11 million of cash spend, and capital expenditures for 2024 were $67 million of cash spent. For the full year, we spent $2 million on Fairmont and Louisiana, leaving $65 million of cash spend in our existing markets. At the end of the fourth quarter, we had approximately $314 million of net debt and $425 million of liquidity, consisting of $281 million of cash on our balance sheet and $144 million of availability on our credit facility. Looking ahead, we are forecasting $75 to $80 million of CapEx for 2025 comprised of $39 to $41 million in our existing markets, $5 to $7 million in Louisiana, and $31 to $32 million for Fairmont. I'd like to note that CapEx for Fairmont includes both Phase 1 and initial construction for Phase 2. After Fairmont and the initial CapEx in Louisiana, we expect company-wide normalized CapEx to return to $40 to $45 million, which will be an encouraging boost to free cash flow and returns on capital. On our capital allocation strategy, we continue to favorably view share repurchases as an effective way to return capital to our shareholders. During the quarter, we repurchased 361,000 shares at an average purchase price of $11.14 a share for a total of $4 million. For the full year, we repurchased approximately 2.4 million shares at an average purchase price of $10.42 for a total of $25 million. Earlier this week, our Board of Directors authorized replenishing our share repurchase program back to 200 million dollars with our strong balance sheet and low leverage we are in a unique position where we can grow our business and continue to return capital to shareholders with that i'd like to turn it back over to andy thanks matt as i mentioned earlier we are very pleased with our strong performance this year and the fact that our teams are working hard to complete construction on phase one of the Fairmont casino.

For the immediate term we remain focused on executing our growth algorithm with improving cash flow and returns. Long term we look forward to capitalizing on the significant growth opportunities ahead of us as an aligned and incentivized Excel team. Excel remains strong as evidenced by our results and healthy balance sheet, enabling us to pursue a multi-pronged approach to capital allocation, making us a compelling investment. Local gaming is an attractive growing niche within the broader gaming market with multiple opportunities to generate strong and consistent revenue and EBITDA growth, as well as strong free cash flow and returns on capital. We will now take your questions.

We will now begin the question and answer session. If you would like to queue up a question please press star followed by a one on your telephone keypad if for any reason you would like to remove yourself from the queue please press star followed by a two as a reminder if you are using a speakerphone please remember to pick up your handset before asking your question again to ask a question please press star followed by a one the first question will come from the line of Steve Pezzella with DoceBank. Steve, your line is now open. Thanks, Matt, Andy.

There are a lot of moving parts with adding in Louisiana to the model for 10 months and 25, everything that comes with Fairmont and the added temporary casino. How should we think about the contributions to the model?

Thanks, Steve. It's Matt. Let's start with Louisiana. You look back to when we disclosed closing it and we disclosed 6 million of EBITDA. So I think for the full year 25 you should add that and like you called out two months of them in 2024's results. For Fairmont, as Mark said, we're planning to open in Q2 so might want to split the difference there but as we sort of talked about earlier full run Fairmont all built out all said and done.

We forecasted 25 million of EBITDA and we've sort of guided that the temp would do about a third of that so you've got a third of that 25 and then you need to prorate it for opening in we'll call it the middle of q2 okay thanks that makes sense um and then just looking uh in illinois in january it looked like it started off pretty strong um at least looking at the data we can see did you um see similar returns in other markets? And are you able to comment at all on February?

Yeah, I mean, this is Andy. Thanks, Steve. We had very favorable weather in January this year, where last year it was a bit rough. And then the weather in February here has been not as good as it was last year. I wouldn't say we don't know whether they'll actually balance themselves out. But elsewhere in the country, we haven't seen the extremes that we've experienced here in Illinois on the weather factor. Overall, I think there's been a well-received demand for our gaming products. And I think we're seeing good results early from some of the remodels we're doing in Louisiana, some of the new product we're introducing in some of the other markets to kind of upgrade our routes has all been very positive for my consumer.

Okay. Appreciate it.

Thank you for your questions. The next question comes from the line of Chad Bainon with Macquarie. Chad, your line is now open.

Good afternoon, Andy and Matt. Thanks for taking my question. Andy, you mentioned just the pruning of the Illinois units really to focus on free cash flow per location. So definitely appreciate the discipline there. At what point will you be through this and then we should expect for some growth in the market? Thanks.

Yeah, so I don't think they're totally tied together. The pruning is really that bottom, the very bottom of our portfolio. And there will always be some that need to be pruned. And we make investments or we have confidence in our ability to either reignite poor performing locations or locations that we think will be decent performers. The owners of the facilities aren't that committed to gaming and therefore we're not getting the returns that we need. So that part of our business will be a constant process. And I think as we've been a little more aggressive in the pruning, as we've seen costs increase from labor, we've seen a tax increase last summer. our focus is to obviously increase the free cash flow. And I think the growth will be continuous because as our assets will be redeployed into better accounts. And I think you'll see it constantly but I think it will really kind of manifest itself probably later this year into next year where the average profitability of the location will be noticeably better great thank you and then last week one of the big manufacturers in the space acquired a uh equal tab or to you know a company in the in the charitable gaming space and they were able

to shine some more light on that sector i believe when you guys talked about um you know the potential areas of expansion for excel uh equal tabs was in there i don't think a lot of uh investors or analysts had a full appreciation of of the sector but now that um another company in space to shine light on that and they talked about you know potential expansion and um yeah how large the sector is is that something that you think is a little bit more front and center in the near term uh just given some of the heightened awareness for that sector or does that um kind of weigh on the scale equal to some of the other opportunities for for future growth Thank you.

Hey, Chad, it's Mark. Good question. So, that market is a really interesting one, but it's – and by the way, it was a great outcome for the company that was purchased, Grover, and we're friendly with that management team and happy that they were able to realize the value they did. But that's a real content market. It's less of a product and service market that we're familiar with so it made a lot of sense for light and wonder to purchase them because of their con the superiority of their content um in terms of excel participate in that market uh we would really have to have a partner who could uh provide that kind of superior content and we could complement that with our our ground game so uh it's an hd market but it's one where um it's it's it's something we'd have to partner with someone to really participate in yeah thanks mark and then lastly if i can sneak in one more there's been some legislation here in in january and

february i think most of it has been around just moving tax rates around and you know there's been some that have uh that would potentially uh bring in i-gaming or sports betting we haven't seen as much in your sector um is that something that you think still could come maybe in this legislative uh session here kind of early in 25 that we're just you know not not aware of at this point or do you think a lot of future expansion um in the route market uh it kind of gets pushed into a later period in terms of legislation thanks thanks yeah this is andy um it's something that we are

always aware of uh we haven't seen any real uh i gaming legislation bubble up uh in this legislative session um inevitably we'll see it whether we'll gain any traction um not as likely as in the past but uh it i i believe it will will continue to see um i gaming legislation in certain markets i don't think it's as likely to be in some of the route gaming markets first i think it's more likely to appear in markets that that don't have route gaming or have um kind of minimal casino presence extensive bricks and mortar route gaming would I wouldn't say it would be the first market that would pass legislation from going forward nor would Nevada but we're constantly monitoring it and we're trying to educate the legislators that the route gaming market is a much better solution with much more regulation and consumer protection, then, yeah, I'd even...

Thanks, Andy.

Thank you for your questions. The next question comes from the line of Greg Giddes with Northland. Greg, your line is now open.

Hey, Andy, Mark, and Matt, thanks for taking the questions. You know, I wanted to ask, I guess, if you could speak to the growth opportunities you see in Louisiana, you know, do you expect to continue to be acquisitive in that market or focus more on organic growth there?

Thanks, Greg, and Sandy. We see it's almost kind of a contradicting market, a mature market, one that's been around for 30 plus years, but at the same time, a market that's not that sophisticated and well-developed. So you still have an incredibly fragmented market, and there's two markets in that that we're looking at in Louisiana. The truck stops, which I think there's like 197 truck stops in the state, and it's still heavily fragmented. And then even more fragmented is the bar market, which most bars in the state of Louisiana are utilizing very old legacy equipment, 20-plus years old. And we see the opportunity to improve our truck stops. We've done pretty well so far. and we're evaluating what needs to be done with the routes that we've purchased i believe that will grow organically over time and the truck stops as some of the mark some of the ownership transitions over the next 10 years um one or two a year may be available for us uh to acquire got it that's helpful um and wanted to

follow up on fairmont um i guess one could you maybe remind us of the timing of phase two development um and i think you already kind of spoke to the uplift you expect to see with maybe phase one being a third of that i wonder if you could maybe break out um you know what piece relates to the FanDuel component in that? And if not, could you maybe break that out?

So in terms of timing, I think we've got it to sort of end of 27 for the Phase 2. As Matt pointed out, we're planning to go live with Phase 1 and Q2, and that would give us a little over two plus years to build a more permanent facility.

And we're not allowed to break out the revenue but um greg it's matt we can't fully break it out but if you think back to when we announced it um the track was around break even maybe making a little so that was sort of imply without with just racing f and b and the sports book sort of how the track was doing pre racino got it that's helpful thanks guys thank you for your questions at this time we do not have any further questions registered in the queue.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. We will pause here briefly to allow any remaining questions to be registered. At this time, we do not have any further questions registered in the queue, so I will turn the call back over to Andy Rubenstein for any final remarks.

Yeah, I just wanted to thank everyone for joining us today. We will be connecting with you in about two months. I think the year is off to a really good start and we'll be excited to share some of the progress we've made when we talk again in May.

That concludes today's call. Thank you all for your participation and you may now disconnect your lines.