Accel Entertainment shared an upbeat vision for both its immediate and long-term prospects in recent investor meetings with Wall Street analysts.
The company, which has 13,400 machines deployed across 2,575 sites, is looking to substantially increase that footprint by acquiring Century Gaming and its slot routes in Montana and Nevada, with 8,300 total machines.
Accel CEO Steve Arntzen calculates that the acquisition of Century will lower the company’s exposure to its primary market, Illinois, which comprises 32 percent of the combined companies’ net revenue and 16 percent of cash flow derived from Century’s markets. The $140 million Century deal was announced this past March and would include manufacturer Grand Vision Gaming, a relative bargain at an industry-average seven-times-cash-flow price tag.
Nevada and Montana are not the only new markets that Accel is contemplating. It is preparing to move into Georgia by purchasing Tom’s Amusement Co., which makes video gaming devices and has a presence in 60 locations in the Peach State, under the supervision of the Georgia Lottery. Deutsche Bank analyst Steven Pizzella wrote, “We view the diversity favorably, as some of the investor feedback is apprehension regarding ACEL’s concentration in the [Illinois] gaming market. We believe this will alleviate some of those concerns.”
Regarding Illinois, Accel continues to entrench in the Land of Lincoln, adding a sixth video gaming terminal per slot route (predominantly bars, restaurants, truck stops and convenience stories), taking advantage of higher betting limits, consolidating smaller competitors, and pressing for the legalization of slot routes in Chicago. (Windy City Mayor Lori Lightfoot remains opposed, preferring an integrated resort.) JP Morgan analyst Omer Sander noted that the sixth-machine provision also enables Accel to swap out older, lower-performing machines with new, high-performance ones.
At present, Accel has the largest market share in Illinois (33 percent), as well as 32 percent of the state’s VGTs, and is winning new licenses at a 38 percent clip.
“Given the still-large total addressable market in IL, we believe ACEL has a clear path towards continued growth,” wrote Pizzella.
The only cloud on Accel’s horizon, added Sander, was the impending issuance of VGTs to horse tracks, diluting Accel’s market share. The company looks for Illinois to reach 24,000 VGT-enabled, liquor-serving locations, up from the current 7,500 (the most in the U.S.).
Once the Century and Tom’s Amusement acquisitions close, Accel will have a presence in Pennsylvania, Illinois, Montana, Nevada, and Georgia, needing only to move into four more states where slot routes are legal: Louisiana, West Virginia, South Dakota, and Oregon. Legalization of distributed gambling — which was opposed by brick-and-mortar casinos — was narrowly defeat in the last Missouri legislative session, depriving Accel of another potential new market. However, Pennsylvania and Virginia governments are looking into expansions of the VGT industry in their respective states and, regardless of the outcome, Accel plans to add another 40 VGT locations to the 60 it already has in the Keystone State.
Accel also previewed its second-quarter results, saying that April net revenue was $68 million, with average daily revenue exceeding that of March, which was the best month in Accel’s history. May net revenues were $65 million. The company predicts annual revenue of $220 million this year. Accel shares traded down slightly following the reports, hovering at $13 per share at press time.
