Accel Entertainment Posts Record Q1 in Growth Push

Accel Entertainment ((ACEL)) has held its Q1 earnings call. Read on for the main highlights of the call.

Accel Entertainment’s latest earnings call painted a picture of solid operational momentum despite a few timing and regulatory headwinds. Management highlighted record revenue and adjusted EBITDA, strong cash generation, and a growing footprint in both core and developing markets, while acknowledging flat EPS and some uncertainty around Chicago regulations and Fairmont Park’s long-term plan.

Record Revenue and EBITDA Underscore Growth

Accel reported its highest-ever quarterly revenue, with Q1 2026 sales up 9% year over year to $352 million. Adjusted EBITDA also rose 9% to $54 million, marking a record first quarter and reinforcing the company’s ability to translate growth into higher operating earnings.

Net Gaming Revenue Fuels Top Line

Net gaming revenue climbed 10% to $331 million, serving as the primary engine behind the overall revenue increase. The performance reflects both higher play levels and continued optimization of the company’s distributed gaming routes.

Expanding Network Scale

Accel’s operating network expanded to 4,540 locations, up 3% from a year ago, with gaming terminals increasing 4% to 28,353. Management emphasized that this growth reflects both new sites and densification in existing markets, supporting future revenue and earnings.

Illinois Core Market Shows Improved Economics

In its core Illinois market, revenue excluding Fairmont rose 6% year over year to $242 million. Average location hold-per-day improved 9%, showing successful route optimization efforts and a shift toward higher-yield machine placements.

Developing Markets Deliver Outsized Gains

Developing states were standout performers, with Nebraska revenue up 57% and hold-per-day also up 57% thanks to new machines and proprietary content. Georgia revenue jumped 43% with a 14% hold-per-day increase, while Nevada and Louisiana also posted double-digit growth metrics.

TITO Rollout Completed, Benefits Still Building

All Illinois terminals are now equipped with ticket-in, ticket-out technology, but player adoption sits at about 13%, below the company’s roughly 20% internal potential. Management expects benefits to accumulate through 2026, though near-term cash-handling impacts remain mixed as higher play can temporarily increase cash pickups.

Fairmont Park Investments and Purse Increases

At Fairmont Park, the company introduced live table games such as blackjack, roulette, and novelty offerings to broaden appeal. Racing purses were increased by $500,000, a move aimed at strengthening the property’s competitive position and reinvesting gaming proceeds into the racing product.

Share Repurchases and Capital Allocation

Accel continued returning capital to shareholders, repurchasing about 1.1 million shares for $12 million year-to-date in 2026. Since the program began, it has bought back 18.7 million shares for roughly $195.6 million, with about $151.2 million still available under the authorization.

Balance Sheet Flexibility and Liquidity

The company ended Q1 with $274 million in cash and total debt of $581 million, resulting in net debt around $306 million and net leverage of about 1.4 times. A fully undrawn $300 million revolver and an interest rate collar, capping rates at 4%, provide additional financial flexibility.

Free Cash Flow and Cash Conversion Trends

Operating cash flow reached $43 million in the quarter, while free cash flow was $20 million, implying cash conversion of around 38%. Management expects free cash flow to improve as capital expenditures moderate and newer markets contribute more meaningfully to earnings.

Strategic M&A and Route Partnerships

Accel continued to pursue bolt-on deals, closing the Dynasty Games acquisition in Northern Nevada, adding about 20 locations and 120 terminals. It also launched a route partnership with Rebel Convenience Stores in Southern Nevada, bringing in 55 locations and more than 400 machines, with further opportunities noted in Louisiana.

Leadership Transition with Continuity

A planned leadership change was announced, with founder Andy Rubenstein set to move to chairman and Mark Phelan to become CEO in August 2026. The company positioned this shift as a continuity-focused succession that maintains strategic direction while refreshing day-to-day leadership.

Flat Net Income and EPS on Timing Effects

Despite higher operating income, net income held flat at $15 million and diluted EPS stayed at $0.17 versus the prior year. Management pointed to higher depreciation and amortization, along with changes in purse expense timing, as key offsets to underlying operational strength.

Purse Expense Timing Weighs on Q1 Results

Fairmont Park purse expenses are now recognized in line with revenue, shifting roughly $2 million of costs into the first quarter. Adjusted for this change, management said EBITDA would have been about $2 million higher and net income about $1.5 million higher than reported.

Regulatory and Legislative Overhang

Executives noted ongoing uncertainty in Chicago and Illinois, where city rules for video gaming have yet to be finalized and a recent state rule is being contested. Broader legislative momentum for expansion, including a veto in another state, remains muted, creating some timing risk for new market opportunities.

Fairmont Permanent Plan Still Undecided

While temporary operations at Fairmont Park are being enhanced, the company has not committed to a permanent development blueprint or timeline. This leaves investors with some open questions on the ultimate scope and return profile of the property’s long-term build-out.

Seasonality and Margin Variability

Management reminded investors that EBITDA margins are seasonal, typically in the mid-15% range during most quarters and higher in the fourth quarter. Timing items like purse accruals further complicate quarter-to-quarter comparisons, even as year-over-year EBITDA dollars continue to grow.

CapEx Levels and Free Cash Flow Still Modest

First-quarter capital expenditures were $23 million, down from $27 million a year ago but still meaningful relative to free cash flow of $20 million. The company expects full-year CapEx to moderate versus 2025, which should help free cash flow as growth investments begin to pay off.

Guidance and Outlook Emphasize FCF and Discipline

Management framed Q1 as a strong baseline, reiterating a full-year CapEx range of $60 million to $70 million, mostly for maintenance and targeted growth in developing markets. They expect free cash flow to expand as CapEx normalizes, TITO adoption improves, and high-growth states like Nebraska, Georgia, and Nevada scale, with Chicago VGTs potentially going live in late 2026 or 2027.

Accel’s earnings call signaled a company leaning into growth while maintaining a conservative balance sheet and active buyback program. Record revenue and EBITDA, strong developing markets, and robust liquidity outweighed near-term noise from flat EPS, purse timing, and regulatory uncertainty, leaving a broadly constructive setup for patient investors.