Slot machine and terminal operator Accel Entertainment (NYSE: ACEL) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 7.3% year on year to $323.9 million. Its non-GAAP profit of $0.23 per share was 17.8% above analysts’ consensus estimates.

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StockStory’s Take

Accel Entertainment's first quarter results were driven by continued growth in core markets and the integration of newly acquired operations. Management highlighted stable revenue in Illinois and Montana, double-digit gains in Nebraska and Georgia, and early momentum in Louisiana following recent acquisition activity. The company also completed Phase 1 construction of the Fairmount Park Casino in Illinois ahead of schedule and under budget, signaling operational execution and expansion potential in a new vertical.

Looking forward, management cited favorable trends in customer behavior and ongoing operational efficiencies as reasons for confidence in sustained growth. CEO Andy Rubenstein pointed to Accel's decentralized and scalable model as a foundation for capital flexibility, while President Mark Phelan noted that early results at Fairmount Park Casino are encouraging. The company plans to continue optimizing its portfolio and expects that recently implemented technology and proprietary content will drive differentiation and future performance.

Key Insights from Management’s Remarks

Accel Entertainment’s leadership identified several operational achievements and market trends influencing the quarter’s results and future outlook. The company’s approach centers on leveraging its distributed gaming model, integrating new acquisitions, and optimizing its asset base.

• Core Market Stability: Illinois and Montana, Accel’s largest states, delivered consistent year-over-year revenue growth, demonstrating resilience in established markets despite competitive pressures.
• New Market Expansion: The acquisition and integration of Louisiana operations added 96 locations and 614 terminals, contributing to revenue growth and broadening Accel’s southeastern presence. Management sees potential for ongoing operational improvements in this region.
• Fairmount Park Casino Launch: The opening of Fairmount Park Casino, Illinois’ first racino, marks a milestone. The property opened ahead of Derby Day, and early customer engagement has been positive. Management expects the casino to become a key growth driver as marketing ramps up and additional amenities come online.
• Portfolio Optimization: Accel continues to prune underperforming locations in Illinois and apply similar optimization strategies in other markets. This reallocation aims to boost overall profitability and capital returns by focusing on higher-margin properties.
• Leadership Transition: CFO Matt Ellis’s planned departure was announced, with President Mark Phelan stepping in as interim CFO. Management expects a seamless transition, citing Phelan’s financial and operational experience.

Drivers of Future Performance

Management’s outlook for the coming quarters is shaped by ongoing optimization of the existing portfolio, operational integration of recent acquisitions, and measured investment in new projects like Fairmount Park Casino.

• Ongoing Market Integration: The company expects further revenue and margin gains as it continues to integrate and optimize recent acquisitions in Louisiana and other new markets.
• Technology and Content Differentiation: Management believes that proprietary electronic gaming machines and customer-facing technology will help Accel stand out in competitive and negotiated markets, supporting future growth.
• Capital Allocation Discipline: With normalized capital expenditures projected to decline after current projects, Accel anticipates increased free cash flow, which could support further investments or shareholder returns. Management also noted that most capital project costs are locked in, minimizing exposure to recent tariff changes.

Top Analyst Questions

• Chad Beynon (Macquarie): Asked about the potential impact of new tariffs on project costs and future growth. Management replied that most capital spending is insulated due to pre-set prices and saw minimal near-term impact.
• Chad Beynon (Macquarie): Inquired if weather affected quarterly results or if consumer trends shifted in April. Management indicated weather was a neutral factor and consumer behavior remained stable through the start of Q2.
• Steve Pizzella (Deutsche Bank): Questioned ongoing pruning of lower-performing Illinois locations. CEO Andy Rubenstein confirmed this is a continuous strategy to optimize returns across all markets.
• Steve Pizzella (Deutsche Bank): Requested an update on Louisiana’s performance and whether Illinois strategies apply elsewhere. Management reported positive early trends in Louisiana and said optimization efforts are being implemented across markets.
• Greg Gibas (Northland): Sought details on Phase 2 timing for Fairmount Park Casino and regulatory considerations. Management stated that post-racing season analysis will guide next steps, with operational input determining the pace and scope of Phase 2.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the ramp-up of Fairmount Park Casino and its impact on Accel’s regional presence, (2) execution on integration and optimization efforts in Louisiana and other newly acquired markets, and (3) the company’s ability to sustain revenue growth in core markets like Illinois and Montana while managing capital expenditures. These factors will provide insight into Accel’s capacity to expand margins and free cash flow as its business model scales.

Accel Entertainment currently trades at a forward P/E ratio of 12.7×. Is the company at an inflection point that warrants a buy or sell? Find out in our free research report.

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