Accel Entertainment, Inc. (NYSE:ACEL) Q4 2023 Earnings Call Transcript
Accel Entertainment, Inc. (NYSE:ACEL) Q4 2023 Earnings Call Transcript February 28, 2024
Accel Entertainment, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, everyone. Thank you for attending today's Accel Entertainment Q4 and 2023 Earnings Call. My name is Sierra, and I will be your moderator today. All lines will be muted during the prepared remarks for our management team with an opportunity for questions-and-answers at the end. [Operator Instructions] I would like to pass the conference over to our host, Derek Harmer.
Derek Harmer: Welcome to Accel Entertainment's fourth quarter and year ended 2023 earnings call. Participating on the call today are Andy Rubenstein, Accel's Chief Executive Officer; and Mat Ellis, Accel's Chief Financial Officer. 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 & 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 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. During the call, we may discuss certain non-GAAP financial measures. For reconciliations of the non-GAAP financial 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.
Andrew Rubenstein: Thanks, Derek, and good afternoon, everyone. Thank you for joining us for Accel's fourth quarter and 2023 earnings call. I'm pleased to report we had another record-setting year, with total revenue of $1.2 billion and adjusted EBITDA of $181 million, year-over-year increases of 21% and 12%, respectively. For the quarter, we reported revenue of $297 million and adjusted EBITDA of $45 million, year-over-year increases of 7% and 3%, respectively. Revenue growth throughout 2023 was driven by the Century acquisition adding new locations and 3% same-store sales growth in Illinois. We also saw growth in our developing markets where we continue to add locations, attract new players and improve our offering with better equipment.
Our continued growth demonstrates the strength of our local business model. Our location partners recognize the value we provide and rely on the incremental revenues our high-quality offering brings to their businesses. On the expense side, our cost structure continues to remain in line with our expectations despite the inflationary impacts on labor and other expenses such as parts. Our asset-light business model and highly variable cost structure allow us to quickly calibrate our business to any changes in the economy. Looking at future growth, our pipeline remains more active than ever as we evaluate multiple opportunities across the country. We are working hard to get the right opportunities across the finish line and look forward to sharing them with you in the near future.
We are also optimistic about the opportunities in the markets where we currently operate. Our strong balance sheet, locally focused business model and consistent growth offers one of the best returns in gaming. With that, I'd like to turn it over to Mat to walk you through our financials in more detail.
Mathew Ellis: Thanks, Andy, and good afternoon, everyone. For the fourth quarter, we had total revenue of $297 million, a year-over-year increase of 7%, and adjusted EBITDA of $45 million, a year-over-year increase of 3%. For the year, we set a new Accel record, with total revenue of $1.2 billion and adjusted EBITDA of $181 million, year-over-year increases of 21% and 12%, respectively. As a reminder, Century has been included in our results since June 1, 2022, and Century operates in markets where the revenue split between Century and the location is negotiated. The margins are attractive, but far lower than our other markets. CapEx for the fourth quarter was $22 million cash spend and CapEx for the year was $82 million cash spend.
The year-over-year increase was due to several factors. First, we accelerated purchases of our redemption terminals to protect against supply chain disruptions. Second, four new high-performing gaming terminals were introduced in Illinois at the same time. In the past, we would normally see one high-performing cabinet released every 12 to 18 months. Lastly, we continue to invest in our developing markets such as Nebraska and Georgia. Based on everything I just mentioned, we view a portion of 2023's CapEx as onetime in nature and we are projecting CapEx in 2024 to be between $55 million and $65 million, a decrease of more than 20%. Over the longer term, we expect CapEx to decrease even further. As of December 31, we had 25,083 terminals and 3,961 locations, year-over-year increases of 7% and 6%, respectively.
Excluding Nebraska, terminals and locations increased year-over-year by 5% and 3%, respectively. Location attrition continues to remain low and is mostly attributable to our lowest performing locations closing their doors. At the end of the fourth quarter, we had approximately $281 million of net debt and $566 million of liquidity, consisting of $262 million of cash on our balance sheet and $304 million of availability on our current credit facility. I would now like to provide an update on our capital allocation strategy. We continue to make progress on our $200 million share repurchase program. During the quarter, we repurchased 1.4 million shares at an average purchase price of $10.31 per share. We are almost 60% through the repurchase program, with more than 11 million shares repurchased at a cost of $118 million.
With our strong balance sheet and low leverage, we are in a unique position where we can grow our business and return capital to shareholders. Similar to prior quarters, we are not issuing guidance due to the near-term macroeconomic uncertainty. With that, I'd like to turn it back over to Andy.
Andrew Rubenstein: Thanks, Mat. We're pleased with another strong year and remain focused on executing our growth strategy to create value for our investors. We're confident that our turnkey, full-service, local gaming solutions provide a platform to continue to produce strong and consistent results. Our focus is to provide unmatched customer support, guidance and expertise so our location partners can grow their businesses. We will now take your questions.
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