Video gaming terminal provider Accel Entertainment rode a wave of acquisitions into the new year and a surge in video gaming terminals. But a sudden November shutdown of video gaming terminals in Illinois, prompted by the coronavirus pandemic, hurt.
Although the company shrank its loss, but revenue fell and missed forecasts.
In a statement Monday, the Burr Ridge, Illinois-based company said its net loss was $10.4 million compared with a net loss of $22.4 million a year earlier. The company didn’t report per-share results.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that excludes one-time costs, fell 94.2% to $4.7 million from $20.8 million.
Revenue fell 39.4% to $74.4 million from $122.8 million and missed the $80.6 million.
In a conference call with analysts Monday, CEO Andy Rubenstein said the company reduced cash burn and furloughed “idle employees” during the November shutdown, but used the time to install, swap and upgrade its terminals and clear backlog.
In mid-January, regions throughout Illinois began reopening with reduced gaming hours; all locales had restored normal gaming operations hours. The company said it generated more than $48 million in gaming revenue in February, making it the best revenue month in company history. Accel ended 2020 with 12,247 video gaming terminals, a 17% increase from 2019.
“These initial results continue to demonstrate the resilience and strength of our local business model,” he said.
On Dec. 30, Accel acquired Northern Illinois operator American Video Gaming for $30 million, which added 49 locations. On March 2, Accel expanded west, acquiring Century Gaming, which operates slot routes in Montana and Nevada and manufactures gaming terminals, for $140 million. Century Gaming has more than 8,500 gaming terminals in more than 900 locations. The deal is expected to close by the end of the year.
Rubenstein said he expects Century to generate $220 million of revenue and $20 million of adjusted EBITDA in 2021.
On Monday, Union Gaming analyst John DeCree said the mergers-and-acquisition activity could boost Accel’s valuation. Union rates the stock “buy.”
“We expect Accel will continue to seek accretive bolt-on opportunities in Illinois as well as meaningful expansion targets (like Century) outside of the state that would further diversify the company’s geographic exposure,” DeCree said in an investors note highlighted on Seeking Alpha. “M&A remains a key growth and valuation catalyst for the company going forward.”
Macquarie Securities analyst Jordan Bender was more cautious. In a separate note posted on Seeking Alpha, he said although legislative tailwinds promised to expand Illinois’ distributed gaming market when Accel went public in late 2019, COVID-19 fallout shifted market dynamics.
“However, permanent restaurant/bar closings and headwinds to small-business conditions will keep near-term organic openings tempered, in our view,” Bender said.
Accel’s full-year net loss shrank 17.8% to $12.9 million from $15.7 million. Full-year revenue fell 26.2% to $316.4 million from $428.7 million.
Accel Entertainment shares fell 11 cents, or 0.9%, Monday to close at $12.10 on the New York Stock Exchange.
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