Good afternoon, and thank you for attending the Excel Entertainment Second Quarter Earnings Call. My name is Jason, and I'll be the moderator today. All lines will be muted during the presentation portion of the call from the opportunity for questions and answers at the end. I'll now express the conference over to your host, Scott Levin.

Welcome to Excel Entertainment's Second Quarter 2025 Earnings Call. Participating on the call today are Andy Rubenstein, Excel's Chief Executive Officer, and Mark Phelan, Excells President of U.S. Gaming and Acting CFO. 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 Security Litigation 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. 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 reconciliation 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. Following management's prepared remarks, we will open the call for a question and answer session. With that, I would now like to introduce Andy. Please go ahead.

Thank you, Scott, and good afternoon, everyone. We appreciate you joining us today. In the 2025 second quarter, Excel generated record quarterly revenue and adjusted EBITDA of $336 million and $53 million, respectively. We continue to build on our leading position in delivering the best gaming experience to the U.S. locals market, as we support more than 27,000 legal and regulated gaming terminals at over 4,400 retail partners across 10 states. Across our broader portfolio, we generated growth in the majority of the markets where we operate. Our Q2 growth reflects our disciplined expansion strategy and consistent execution in our core, developing, and new markets. Excel's continued growth will benefit from its strong competitive position and healthy balance sheet as we pursue our multi-pronged growth strategy. Today's call should leave everyone with the understanding that local gaming is an incredibly attractive, resilient, and a growing segment within the broader gaming market. And, as a leader in this segment, Excel expects to continue to generate near- and long-term growth in revenue, adjusted EBITDA, and free cash flow. We plan to achieve these goals by leveraging our operating expertise while also remaining focused on often overlooked M&A opportunities, which I will discuss in more detail later on the call. As a market leader in Illinois, this market remains the foundation of our business, with second quarter revenue up over 8% to a quarterly record $245 million. This increase was driven by our strategic game enhancements and location optimization initiatives, which resulted in a 6% year-over-year increase in location hold per day to $910. Our second largest core market, the Montana Distributed Gaming Route, grew revenue by 2.6 percent as it continues to scale its content and systems products to support its dominant market share. Our developing markets, Nebraska and Georgia, grew revenue by 26.1 percent and 53.5 percent, respectively, while Nevada revenue declined by 7.7 percent. As Nebraska and Georgia continue to take market share with superior service and products, Nevada's decline reflects the loss of a key customer in 2024 due to a change in ownership. We remain optimistic about our growth potential in all three markets, where strategic investments are now beginning to contribute to Excel's overall growing adjusted EBITDA. In our new markets, we are seeing tangible contributions from our Toucan Gaming acquisition in Louisiana. That acquisition further expanded our operations in the southeast by adding over 600 terminals across nearly 100 locations. Toucan Gaming generated approximately $10 million of second quarter revenue, and we expect to realize additional synergies and revenue as well as adjusted EBITDA performance gains. Our performance reinforces our confidence that these benefits will become even more apparent into next year. In April, Excel's installation of 271 gaming positions completed phase one of its casino at Fairmont Park. Our soft opening just prior to the Kentucky Derby generated a strong turnout, bringing excitement to this historic venue. Fairmont continues to ramp up steadily, and we remain confident in its long-term contribution. We expect our player acquisition and retention strategy to expand our player database and drive market share gains. In addition to our racing and casino business at Fairmont, Excel benefits from a long-term revenue sharing agreement tied to FanDuel's online sports betting operations across the state of Illinois. life. When taken together, the early operational progress at Fairmont and the FanDuel revenue sharing arrangement, we enforce our confidence that Fairmont Park Casino and Racing will continue to contribute to our adjusted EBITDA growth as we move into 2026. Looking ahead, our M&A pipeline remains active. We continue to evaluate opportunities across the large and fragmented local gaming market, estimated at over $15 billion nationally. We remain focused on disciplined, accretive transactions that do not stretch our balance sheet. Most of these assets are below the radar of larger operators, creating attractive opportunities for Excel to expand our footprint while maintaining strong financial discipline. Our consistently strong financial performance and ongoing progress reflect the inherent resilience of our business model and its ability to generate compelling returns on invested capital. Our decentralized approach spanning thousands of retail locations provides the diversification and the flexibility to efficiently allocate capital in line with local demand and market dynamics. With that, I'm going to turn it over to Mark to walk us through the financial results in added detail.

Thanks, Andy. For second quarter, total revenue was $336 million, representing year-over-year growth of 9%. Without the acquisition of Fairmont Park and our Louisiana assets, total revenue was $317 million, representing year-over-year growth of 2.4%. Adjusted EBITDA for the second quarter was $53 million, a year-over-year increase of 7% compared to second quarter 2024. As of June 30, 2025, we operated approximately 27,400 terminals across more than 4,400 locations, representing year-over-year increases of 3.4% and 3.1%, respectively. As Andy stated earlier, we look at our distributed gaming portfolio across three markets, core, developing, and new. Each of these markets is positioned to grow revenue and earnings at different rates for different reasons. Our core markets, Illinois and Montana, are our largest and most seasoned markets, and we expect them to scale their platforms to drive higher margins and free cash flow over time. Our developing markets in Nebraska, Nevada, and Georgia are fast-growing markets where we expect our prior infrastructure investments and scale to generate meaningful increases in revenue and operating margins. We expect that our new markets of Louisiana and Fairmont Park will experience revenue growth while initially generating lower margins as we invest in their operating platforms. I also wanted to provide more revenue detail on our two core markets, Illinois and Montana. The Illinois distributed gaming market contributed $236 million of revenue, which grew by $9 million, or 3.9%, in second quarter of 2025 compared to prior year. Our Montana distributed gaming route experienced positive quarterly revenue growth of 2.6%, while Grand Vision Gaming, Excel's wholly owned slot machine manufacturer, saw a decline in revenue primarily due to timing on software sales as Grand Vision Gaming or GBG updates its operating platform to support product availability that excels other markets. GBG, our Billings Montana-based slot manufacturer, and Century, which runs our distributed gaming route, are reported together under Montana Consolidated Operations. As a result, the year-over-year quarterly revenue shows a decline for Montana on a consolidated basis. As we mentioned earlier, Nevada experienced a revenue drop from the loss of a key customer due to an ownership change. In spite of that loss, we have done a great job optimizing our operating footprint in Nevada in the second quarter. I also wanted to address our recent operational wins, which include Illinois increased operating margins by 70 basis points in the second quarter of 2025 as the team scaled our existing infrastructure. pressure. Illinois launched Ticket In, Ticket Out, Tito, late in July, with a phased rollout expected over the next few months and a full implementation date to be determined. We believe Tito has the potential to provide a better player experience, lower field cash needs, and potentially lower our operating expenses. Montana rolled out proprietary gaming content and gaming systems designed to increase average profitability per store. Both Nebraska and Georgia utilize attractive redemption products and gaming infrastructure to profitably increase market share. Finally, Louisiana legislation passed that allows for an additional video gaming machine per route location, as well as additional video gaming machines to truck stops. As a reminder, our route markets are bifurcated between negotiated and legally defined revenue splits with retail and state government partners. Only our Illinois, Georgia, and Pennsylvania markets have legally defined revenue splits, which are determined statutorily. The rest of our markets have revenue splits which are negotiated between locations in For competitive reasons, we do not disclose the operating margins in these states and their implied gross margins, both of which are driven by revenue splits. Moving on to capital expenditures. For the second quarter, our CapEx totaled approximately $26 million. We are reaffirming our full year 2025 CapEx forecast of $75 to $80 million, including approximately $39 to $41 million for our legacy market, $5 to $7 million for Louisiana, and $31 to $32 million for Fairmont Park. CapEx for Fairmont Park covers both Phase 1, which is now complete, and our initial investments in Phase 2 planning. Following the completion of these projects, we expect normalized annual CapEx to return to the $40 to $45 million range. At quarter end, we had approximately $331 million of net debt and $392 million of liquidity, consisting of $265 million of cash and $127 million of availability under our credit facility. Lastly, we remain committed to returning capital to our shareholders. During the second quarter, we repurchased 634,000 shares at an average price of $10.58 per share for a total of $6.7 million. This brings the total shares repurchased for the six months ended June 30, 2025 to 1.6 million shares at a total of $16.9 million. With a strong balance sheet and low leverage, we believe we are well positioned to continue to grow our business and return capital to shareholders. With that, I'd like to turn it back over to Andy.

Thanks, Mark. As I mentioned earlier, we are pleased with the direction of the business, including our record quarterly revenue and record quarterly adjusted EBITDA. Local gaming remains an attractive, resilient, and growing market segment with large untapped potential, which presents Excel with multiple opportunities to continue to generate strong and consistent revenue, adjusted EBITDA, and free cash flow growth moving forward. With that, I now would like to open the call to questions. Operator?

If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like remove that question, please press star followed by two. Again, to ask a question, it is star one on your telephone keypad. Our first question is from Chad Bainon with Macquarie. The line is now open.

Hi, good afternoon, Andy and Mark. Thanks for taking my question. I wanted to start with the strong growth that you showed in Illinois. Since it's the biggest market and you're categorizing it as a core market. Can you just talk about, you know, what you saw throughout the quarter? We've heard from a number of other gaming companies who've said that, you know, the quarter started off, you know, certainly differently than it finished, given all the volatility in the market, but was just wondering if you could give a little bit more detail in terms of how the quarter shaped up, given some consumer volatility. Thank you.

Hey, Chad. It's Mark. Thanks for the question. It was actually pretty consistent growth through the quarter. All three months generally were kind of consistent with the volume. So we didn't really see much of a peak or value. It was just generally consistent.

Thank you. And then, Andy, just on your comments around M&A, I know you introduced the idea in a larger way, probably about a year ago with the Fairmont acquisition. What size asset portfolio EBITDA should we think about that you and the team will be looking at, or maybe ask a different way? How much leverage are you willing to put on this business at this point, given your cash and facility availability at this point? Thank you.

Thanks, Ed. As we look at it, we're always opportunistic on the acquisitions, but I would tell you, consistent with our history, we're not looking to lever up the company in any extreme way. We've always kind of played it relatively conservatively. We have plenty of availability in our credit facility as we're about to refresh that. And obviously, the company generates significant cash flow. So as we move forward, we're evaluating opportunities to best deploy that cash. And like the recent opportunities that we saw both at Fairmont and in Louisiana, we take advantage of those opportunities. So I would expect that we would be consistent in looking where the opportunities are adjacent or actually involved with the markets that we're in, and we look to continue to grow with those different opportunities.

Hey, Chad, this is Mark, too. I would just point out that the local gaming market of which we think we're a premier player in generally are smaller assets in that these are unconsolidated, sort of less professional operators, and so it tends to lean where the opportunities are smaller and you can take more bite-sized acquisitions okay and i i would presume with some of those there's opportunities to improve the margins or improve something with the business that that you have the the business acumen to implement yeah i think in general we have a competitive advantage

in the fact that we have scale, we have the ability to implement technology from the grand vision operations that we have. We operate systems, reward systems in both Montana, Nevada, and in Nebraska. We have the ability to manufacture equipment. So as we look at a market, that we can take a more holistic view and we believe that it's allowed us to be much more competitive and much more aggressive as we approach these opportunities.

Appreciate it. Thank you.

Our next question is from Steve Bezella with Deutsche Bank. Your line's now open.

Hey, good afternoon. to thank you for taking our questions. First, you noted Tito in Illinois started in July. What are your expectations for how that can impact earnings moving forward?

Thanks. Thanks, Dave. It's Andy. As we look at Tito, it's really, really early in the game because over half of the machines have not had Tito kind of implemented. And we're waiting for the IGB is they're they're rolling it out so we're really early with like literally weeks into it I think it's our second week this quarter we don't expect anything material and we'll be able to by the time we report the third quarter can I give you a little more indication of what impact it will have on the market we do think it will help with our reduce the cash that we have as people utilize their tickets in multiple machines that aren't continually cashing out the the player experience will be better and it should mildly reduce the collection costs so we're we're watching it closely and we'll see what more to report after this quarter.

Okay, thanks.

And then in Nevada, I think you noticed the loss of a key customer. What is the market growing at the one customer? And have you seen any changes in the market to start the third quarter at all?

Yes, Steve, it's Mark. So net of that customer, we actually grew slightly in revenue year-over-year and in terms of the market there you know it's really bifurcated kind of into in sort of locations that have licenses and locations that don't and instead pay leases we're much more aggressive about the former in terms of getting higher margins uh and uh we saw that from our team there they performed uh significantly better in terms of margin even without the the one key customer and so we we like that market a lot actually and we're growing and that's why we've kind of included in our developing markets even though

it's a it's a market that's been around 30 plus years okay great thank you our next question is from greg kubus with northland your line is now open hey good afternoon andy mark thanks for taking the questions congrats on the record results um you don't want to just ask maybe how performance at the racetrack and casino has performed relative to your initial expectations and uh maybe what your updated expectations are for fair amount this year following phase one completion and launch

yeah hey greg uh it's mark um so we don't just you know we're not going to break out uh operating segments but um we underwrote the park uh as as sort of a valuable asset for a variety of reasons and and we've they some have to do with uh casino racing and then and then sports book and then fmb food and beverage and we've seen positive indicators for all four uh that kind of matched our internal expectations uh so we're pretty excited about the asset um it's still very early days it's 13th week um but uh we will uh i think we commented that we think it's going to be a

significant contributor in 26 and we still feel pretty confident about that great and i guess to follow up there um when do you expect to have maybe a more material update on phase two timing given that you are spending capex this year on on phase two planning and maybe what more specifically is that kind of spending uh going towards or allocated for so the the second part the question, Greg, is really just design.

And so you have to kind of understand the asset, and we invite all of you to come out and view it sometime. But it's a 183-acre campus with multiple different buildings. And one of the things you really need to understand in order to be successful in the phase two is how people interact between those buildings. We're still really figuring that out. We've learned a lot in the last 13 weeks, And we think we'll learn a lot more. The racing season ends at the end of October. And so we're kind of like TBD on exactly what we're going to do for phase two. We also have to work with the Illinois Gaming Board in order to meet their timeline. So there's a lot that goes into it. But we're trying to be very thoughtful about it and be extremely good stewards of capital.

Appreciate that.

And I guess lastly, could you just remind us of the timing of that key customer in Nevada, just as we think about year-over-year comps? yeah it was it was kind of end of q3 uh when i left uh 24 sorry got it thanks very much yep thank you it looks like there are no more questions so i'll pass the call back over to the management team for closing remarks thank you at excel we're staying focused we're executing well and we remain confident in our long-term strategy i want everybody to enjoy the rest of the summer and we look forward to sharing our continued progress when we report results again this fall. Thank you for joining us.

That concludes the conference fall. Thank you for your participation. Enjoy the rest of your day.