Businesses that offer outdoor recreational activities suffered during the pandemic as most people turned to the internet for entertainment after the shelter-in-place orders came. Accel Entertainment Inc. (NYSE: ACEL), a provider of slot machines and amusement devices to retail establishments, seems to have shrugged off the COVID woes with a positive start to fiscal 2021 aided by location growth and new installations.
In an interview with AlphaStreet, Accel’s president and chief executive officer Andy Rubenstein provided insights into recent changes in legislation and its influence on the business. In 2019, regulators approved the installation of a sixth machine at each location and allowed software with higher bet limits, which came as a tailwind for the company in terms of revenue performance. The result was clearly visible in the following summer, which is otherwise a soft period for the business — revenues rose and matched the historical seasonal trend.
“The rollout of the 6th machine started in January 2020 and the new software rollout started in July 2020. By early 2021, the 6th machine and new software were mostly installed. We saw outstanding performance beginning mid-March due to our convenient and hyper-local footprint. March is always our best month of the year and the summer months typically generate 10-20% lower revenue,” said Andy.
Going forward, Accel’s growth prospects would depend on legalization of distributed gaming at the regional level, since the majority of states are yet to give the green signal. However, the company still has substantial room for continued growth in Illinois where the business is currently concentrated. Also, the management is optimistic about Accel’s recent entry into Georgia and its growth prospects there.
Continuing its foray into new markets, Accel recently acquired gaming operator Century Gaming, Inc. which has a strong presence in key markets like Montana and Nevada. The $140-million transaction is expected to close by the end of 2021. “We continue to evaluate other organic and inorganic opportunities and believe we have the right playbook to be a top operator in any new market,” said Andy.
When asked about Accel’s capital raising strategy, he added, “…we do not have any formal plans but we are an acquisitive company and would turn to the most efficient capital market to help fund our expansion.”
The company registered strong earnings in the first half of 2021, after slipping into the negative territory in the final months of the last fiscal year. Analysts’ consensus estimates indicate the positive trend would continue in the second half.
In the June quarter, revenues climbed to a record high of $202 million from $0.4 million in the year-ago period. Supported by the strong top-line performance, the company swung to a profit of $12.4 million or $0.13 per share from a loss of $46.8 million or $0.60 per share in the second quarter of 2020. Adjusted EBITDA was around $43 million.
After slipping to an all-time low in the early days of the pandemic, Accel’s shares recovered quickly and made steady gains. The stock has grown about 18% so far this year and hovers near the pre-crisis levels. On Friday, it opened at $11.45 and traded lower during the session.