Q2 2021 Acceleron Pharma Inc Earnings Call
Accel Entertainment's Q2.2021 earnings call.
At this time all participants are in a listen only mode.
Happy to speaker's presentation, there will be a question and answer session.
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I would now like to hand, the conference over to your Speaker today, Mr. Matthew Ellis Senior Vice President of corporate strategy.
Welcome to Accel Entertainment's second quarter 2021 earnings call participating on the call today are Andy Rubenstein, <unk>, Chief Executive Officer, and Brian Carroll <unk> 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 and presentations within the Investor Relations section of our website. Some other comments on today's call may constitute forward looking statements within the meaning of the private Securities Reform Act of 1090.
5 <unk>.
These forward looking statements are subject to risks and uncertainties, including those related to COVID-19, and its variant strains.
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 <unk>.
Fillings with the SEC.
During the call we may discuss certain non-GAAP financial measures for reconciliations of the non-GAAP 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 Mr. Andy Rubenstein.
Thanks, Matt Good morning, everyone. Thank you for joining us broke sales second quarter earnings call.
I'm pleased to report the second quarter of 2021 was the best quarter in <unk> history.
We set new revenue and adjusted EBITDA Records as discussed during our June Investor Day. The primary drivers of the higher revenue, where the completion of higher bet limits software upgrades and the <unk> installations. The combination of these initiatives contributed to the increased location revenue on average between <unk>.
30%, 35%.
Versus 2019 levels. We also benefited from the third round of stimulus checks and higher demand due to the lack of other entertainment options as the economy was not fully open.
The improvements in our product offering with the critical drivers for this strong performance.
Enter the summer months, and Illinois fully reopened we watch revenue closely to see where it would settle <unk>.
February March and April are traditionally the 3 last months of the year, while June and July our lowest performing months.
I am pleased to share that our July gaming revenue was seasonally better than normal and above our previous expectations.
This reinforces our belief that the elevated revenue we are seeing was driven by the initiatives and may be sustainable due to Q2 strong results and the strong start to Q3, we are raising our guidance ill leave it to Brian to walk you through the new numbers later on the call.
Turning to growth our sales teams continue to sign additional competitor and organic locations.
Moving the most recent IGD meeting on July 14th year to date, <unk> was awarded 168 or <unk>, 38% of all new licenses.
Our ability to win more licenses than our current market share is a strong testament to our sales capabilities and is just 1 of many competitive advantages that differentiate us from other operators there.
There have been some questions about the relatively low number of licenses issued at the last gaming Board meeting in July however.
However, when looking at the calendar there was a short amount of time between meetings. In addition to the July 4th holiday weekend.
We will always push ourselves to win more than our share.
And help our local business partners generate incremental profits, which will lead to further location growth.
It's too soon to determine what the new total number of annual license will be going forward, but we will see a significant amount of runway in Illinois as illustrated in our June Investor Day presentation.
Looking at other states, we remain cautiously optimistic that several states will consider distributed gaming in the future for.
For example for.
Junior recently banned unregulated devices, which could be a first step towards regulated gaming.
We will continue to work with the various stakeholders in these states to educate them about the benefits of distributed gaming and the incremental revenue it generates for state and local governments as well as small businesses.
Should a new state legalized gaming, we believe our growth playbook in Illinois, and will enable us to be successful in any future market.
Which decreased 7% over the same period.
Over that same period excels growth was 92% overall.
<unk> 60 per 7% when normalized for the Grand River acquisition.
With that I'd like to turn it over to Brian to walk you through the numbers in more detail. Thanks, Andy and good morning, everyone. Please remember that we were shut down in the second quarter of 2020, So I will admit prior period comparisons where appropriate or make comparisons to the second quarter of 2019.
For the second quarter, we had total revenue of $202 million and adjusted EBITDA of $43 million.
Revenue per location per day for the second quarter with $855, an all time high per itself, an increase of 35 per cent compared to the second quarter of 2019.
As Andy discussed earlier are the primary drivers of the increase were the higher bet limits software and our fixed fee DT initiative. In addition to some overall higher demand partially driven by the third round of stimulus checks.
Capex for the second quarter was $9 billion cash spend on <unk>.
This was related to some deferred payments in the fourth quarter due to the partial shutdown.
As of June 30, we had 13177 <unk> in 2000 and 527 locations.
Year over year increases of 19% and 8% respectively.
Location attrition continues to remain low and mirror the pre COVID-19 historical averages is that.
Our belief that businesses with incremental gaming revenues had a lower failure rate as compared to businesses without.
As of June 30, we have largely completed the installation of the higher beds on the software and the 6 feed your ts across our footprint.
We believe our second quarter results highlight the positive impact of both initiatives.
To refresh everyone's memory the rollout of the 6 TGT started in January of 2020, and the rollout of the higher bet limits software started in July 2020.
At the end of June our average residual contract length was approximately 6.8 years, the same light as last year and a small increase as compared to last quarter.
Our ability to maintain and even raise the residual contract length is a true testimony to the hard work of all our teams, including service collection marketing and relationship management.
We've always believed that people give us a competitive advantage and we'll continue to invest in them to deliver the best in class experience for our customers locations and players.
At the end of the second quarter, we had approximately $167 million of net debt down $20 million from Q1, and $266 million on liquidity consisting of $179 million of cash on our balance sheet and $87 million of revolver availability.
As Andy mentioned earlier, we are raising our outlook. However, due to the uncertainty of the Delta variant, we've decided to do so conservatively as follows.
We are now forecasting to end the year with 13555% to 13680 D. G Ts and 2592 on 2000 and 615 locations.
Revenue for 2021 is now expected to be $700 million to $725 million with adjusted EBITDA of $133 million to $138 million.
Capex is still expected to be $20 million to $25 million cash spend.
Yearend net debt, excluding any acquisition financing should be approximately $123 million to $128 million, implying a yearend trailing debt to EBITDA multiple of only <unk> 9, giving us ample firepower to pursue additional inorganic and greenfield opportunities.
Remember our annual guidance for 2021 includes the impact of a lower than normal Q1, given the COVID-19 shutdowns in place to start the year.
Back to you Andy.
Thanks, Brian.
We are extremely pleased with our performance this quarter and even more excited for what the future holds.
It's important to remember that our products a day is substantially better than it was in 2019 and that is reflected in our recent results and outlook.
We have newer cabinets.
Other software higher jackpots and other locations continue to invest in nicer gaming areas, given the strength and importance of the incremental revenues, we help them generate.
We were watching the delta variant closely.
Hopeful it has a minimal impact.
Moving on our players customers and <unk> employees.
We remain confident that our asset light hyper local business model creates a platform to outperform a difficult times and really drive under normal circumstances as demonstrated by our recent results. We aim to leverage our differentiated operating model an extremely strong financial position in order to continue on.
Expansion, both in Illinois and across the country on <unk>.
<unk> would not be possible without our dedicated employees and loyal customers.
They are the true competitive advantage of our business that make it sell the preferred choice and distributed gaming we will now take your questions.
And I think we reminded me to ask a question you will need to press star 1 on your telephone keypad again that is star 1.
On your question you may see in please press the pound key leased.
At least on Bible, we compile the Q&A roster.
Your first question is from Omer Sander <unk> from JP Morgan Your line is open.
Hi, Andy Brian Matt Congrats on the strong results.
The question, if I heard correctly, you're mostly done with the rollout of the 6 T. G. T. As you look through your portfolio or does the focus now shifts towards replacing some of the underperforming units both at existing and newly acquired locations. I guess the question is how do you how do you think about that opportunity.
Thank you Robert.
We look at the opportunity to replace equipment on a cost basis is something that we do literally weekly evaluating.
Underperforming equipments.
And.
Specific locations, where maybe in that particular micro market.
That.
Certain pieces of equipment this desire and we therefore look.
What is the momentum in that market on a player.
Yes.
Equipment in there so it's across on process when we do we keep up.
Inventory of equipment on our warehouse, so we're not having to await some place.
Shipments are updated.
I would say, it's an ongoing process on something.
We do as a company to optimize performance for our established partners.
Yeah.
And the need to generate a tax revenues.
To be honest I don't know exactly their motives, but they.
On my best to try to.
Go through an authorized as many applications as possible.
In today's environment.
They're somewhat restricted due to.
Their workloads and they've got a tremendous amount of workload with the.
The new casinos that theres still trying to.
Authorized or review the application so.
Our gaming warehouse.
On the best I can with SaaS on ebay.
They currently have.
We're not staffed to take on.
A bunch of new casinos, plus on a rapidly growing industry at once.
They're on a normal staffing level.
The additional cash.
A single expansion is definitely.
Fin streams on some of the resources.
Okay. Thanks, so much I appreciate the color.
Your next question is from Greg Davis from Northland Securities. Your line is open.
Yeah.
Hey, good morning, Andy Brian Thanks for taking the questions and congrats on the quarter.
A couple of follow ups on I guess first as we see new state market legalized video gaming what kind of gives you confidence that ex <unk>.
Early player operator in those markets.
Yes.
Yeah.
Hey, Greg.
As we look at these markets on a lot of them were.
Pretty accurate.
On working with the legislators are working with a local.
Our business partners in those markets.
We historically have been a great business partner to the local operators.
Okay.
On cost and.
We think.
That.
Historical success net reputation of on.
Being a good business partner, whether it's to the establishment or to the local operators will continue.
To be or kind of.
Secret to success and cash.
As we've gone into some of these markets already.
We've been able to establish great partnerships.
I think it will play out with.
On a position of market leadership.
As the market opens up.
We've demonstrated over the last.
10 years at XL.
We can continue to thrive and dynamic markets.
Great I appreciate that.
To follow up on you talked about.
In a good number of M&A opportunities that you mentioned wanted to ask I guess, mostly Illinois focused or are they.
New market focused.
And then maybe.
All of those opportunities.
Changed since the last couple of quarters are you seeing more.
Or is it.
Thanks.
You'll see us continue to pursue opportunities.
And Illinois outside.
And these other shapes and I think it will probably.
Yeah that celebrating right.
2 years.
Awesome, great well, that's all I had I just wanted to congratulate on the license plates do I mean, the 38 per cent of the day, that's impressive but I'll pass it on thanks.
Thank you.
And that's at a reminder, that is star 1 to ask a question.
Your next question is from Steve is Ella from Deutsche Bank. Your line is open.
Hey, guys. Thanks for taking the questions margins are pretty impressive for the corner can you talk about what you were doing on the cost side and the level of sustainability for these levels moving forward.
Yeah. Thanks C b.
A lot of the police was due to a obviously.
In case leather on us so incremental revenue come on a much higher Carter.
On the cost side.
We haven't been on that cost cutting.
Cutting mode when more on a <unk> and we.
Ah continuing to invest.
In our system, it's painful to ensure that we can grow bulb same store sales as well as.
As future opportunities.
And I think.
The Martin House, we'll probably.
Kind of move more toward the.
[noise] Hi, 19.
<unk>.
As we get it on or sustainable.
Revenue.
Performance so.
I think you'll see that.
The investment with.
For the growth will.
Will bring those large on I was kind of down.
Acquaint herself and but it will also ensure that we will have the growth that vs demonstrated in the past we expect to do on a feature.
Mmk great. Thank you that's helpful. And then now that you've been in Georgia for about a year now can you talk about what you've learned in the market.
Did you review the opportunity to be there.
So Georgia.
An interesting year.
We feel very strongly that it's that it can be Ah.
A very successful market on a long term basis and we've invested in.
Building on infrastructure.
Working with the state or a pilot where it is where income.
With those guidance and that there is upside but it's.
Just want to take a month by month and see how it goes with everything.
Okay, and then as my follow up here you've mentioned it in your prepared remarks.
Backlog is pretty strong right now I was wondering if you could just give us color on kind of where 6 now vs. Maybe at the end of 1.2 or even back to level, it's like in 2019 herself.
[noise], Yeah, I would say that sure.
Russia gaming.
Momentum.
Who is on a backlog.
And part of that is due to the fact.
Net where shane.
I was gonna start to reopen.
Marsha and business on set.
Close.
As we kind of.
People that kind of cash.
Cassie.
[noise] concern around on us.
Long horn on facts on the pandemic so.
I think we have Ah Ah.
A good.
12 months of building a backlog ahead of us.
Where you'll see strength N N.
In case of the location on something we have on their contract.
Mmm.
In the past and I think will will reach levels, probably closer to 19.
[noise], Okay. Thanks, guys next quarter.
Okay.
Alright, and I'm showing no further questions at this time I would like to turn the call back over to you Mr. Matthew Mister.
Mister Andrew for Reuben fee for any additional or closing remarks.
Yeah. Thank you everyone. How can we ask the day.
We look for we're.
We are often mistaken as to the.
The continued growth of excel, obviously from a personal and.
As well as for everyone on or concern about the the Delta Vernon.
And how soon affect the economy.
And we have gone to.
Okay.
Precautions to make sure our employees or invest L and we hope everyone on I've got a fender bass to make sure that.
On the can you should move forward. So thank you again.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and have a great day.