Accel Entertainment, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and analysis should also be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “believe,” “expect,” “plans,” “intend,” “may,” “strategy,” “prospects,” “estimate,” “will,” “should,” “could,” “project,” “target,” “anticipate,” and other similar words and involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024. Any forward-looking statements made by us speak only as of the date on which they are made. We are under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by law. This discussion and analysis should also be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

We install, maintain, operate and service gaming terminals and related equipment for our location partners as well as redemption devices that have automated teller machine (“ATM”) functionality and stand-alone ATMs. We offer amusement devices, including jukeboxes, dartboards, pool tables, and other entertainment related equipment. These operations provide a complementary source of lead generation for our gaming business by offering a “one-stop” source of additional equipment for our location partners. We also design and manufacture gaming terminals and related equipment. We are continuously evaluating additional opportunities that are complementary to our core business, such as our recent acquisition of the FanDuel Sportsbook & Horse Racing, which has been rebranded as Fairmount Park - Casino & Racing (“Fairmount”) in Collinsville, Illinois. In April 2025, the casino opened and the racing season began at Fairmount.

Current wording

We install, maintain, operate and service gaming terminals and related equipment for our location partners as well as redemption devices that have automated teller machine (“ATM”) functionality and stand-alone ATMs. We offer amusement devices, including jukeboxes, dartboards, pool tables, and other entertainment related equipment. These operations provide a complementary source of lead generation for our gaming business by offering a “one-stop” source of additional equipment for our location partners. We also design and manufacture gaming terminals and related equipment. We are continuously evaluating additional opportunities that are complementary to our core business, such as our acquisition of Fairmount Park - Casino & Racing (“Fairmount”) in Collinsville, Illinois. In April 2025, the casino opened and the racing season began at Fairmount.

Previous wording

To date, we have not observed material impacts in our business or outlook, outside of observed increases in our costs related to higher wages and increased interest expense on our debt. In the first half of 2024, we accelerated certain of our capital expenditures related to gaming machines and related components to manage our supply chain.

Current wording

For the first half of 2025, we have not observed material impacts to our business or outlook from the macroeconomic factors noted above, outside of higher compensation-related costs. In the first half of 2024, we accelerated certain of our capital expenditures related to gaming terminals and related components to manage our supply chain.

Previous wording

ATM fees and other. ATM fees and other consist of fees charged for the withdrawal of funds from our redemption devices and stand-alone ATMs and is recognized at the time of the ATM transaction. Beginning in the first quarter of 2025, revenues from our racing operations are also included.

Current wording

ATM fees and other. ATM fees and other consist of fees charged for the withdrawal of funds from our redemption devices and stand-alone ATMs and is recognized at the time of the ATM transaction. Beginning in the first quarter of 2025, revenues from our casino & racing operations are also included.

Previous wording

Cost of revenue. Cost of revenue consists of (i) taxes on net gaming revenue that is payable to the appropriate jurisdiction (effective July 1, 2024, the tax on net gaming revenue in the State of Illinois increased from 34% to 35%, which is split equally between us and our locations in Illinois), (ii) licenses, permits and other fees required for the operation of our business, (iii) location revenue share, which is governed by local governing bodies and location contracts, (iv) ATM and amusement commissions payable to locations, (v) ATM and amusement fees and (vi) expenses from our racing operations.

Current wording

Cost of revenue. Cost of revenue consists of i) taxes on net gaming revenue that is payable to the appropriate jurisdiction (effective July 1, 2024, the tax on net gaming revenue in the State of Illinois increased from 34% to 35%, which is split equally between us and our locations in Illinois), ii) licenses, permits and other fees required for the operation of our business, iii) location revenue share, which is governed by local governing bodies and location contracts, iv) ATM and amusement commissions payable to locations, v) ATM and amusement fees and vi) expenses from our casino & racing operations.

Previous wording

General and administrative. General and administrative expenses consist of operating expense and general and administrative expense. Operating expense includes payroll and related expense for service technicians, route technicians, route security, and preventative maintenance personnel. Operating expense also includes vehicle fuel and maintenance, and non-capitalizable parts expenses. Operating expenses are generally proportionate to the number of locations and gaming terminals. General and administrative expense includes compensation-related costs for account managers, business development managers, marketing, and other corporate personnel. In addition, general and administrative expense also includes marketing, information technology, insurance, rent and professional fees.

Current wording

General and administrative. General and administrative expenses consist of operating expense and general and administrative expense. Operating expense includes compensation-related costs for service technicians, route technicians, route security, and preventative maintenance personnel. Operating expense also includes vehicle fuel and maintenance, and non-capitalizable parts expenses. Operating expenses are generally proportionate to the number of locations and gaming terminals. General and administrative expense includes compensation-related costs for account managers, business development managers, marketing, and other corporate personnel. In addition, general and administrative expense also includes marketing, information technology, insurance, rent and professional fees.

Previous wording

Interest expense, net consists of interest on our current credit facilities, amortization of financing fees, accretion of interest on route and customer acquisition costs payable, and interest (income) expense on the interest rate caplets. Interest on the current credit facility is payable monthly on unpaid balances at the variable per annum SOFR rate plus an applicable margin, as defined under the terms of the credit facility, ranging from 1.75% to 2.75% depending on the first lien net leverage ratio.

Current wording

Interest expense, net consists of interest on our current credit facilities, amortization of financing fees, accretion of interest on route and customer acquisition costs payable, and interest (income) expense on the interest rate caplets. Interest on the current credit facility is payable monthly on unpaid balances at the variable per annum Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin, as defined under the terms of the credit facility, ranging from 1.75% to 2.75% depending on the first lien net leverage ratio.

Previous wording

Cost of revenue for the three months ended March 31, 2025 was $221.5 million, an increase of $12.3 million, or 5.9%, compared to the prior-year period, driven by higher net gaming revenue and revenue from our racing operations, as described above.

Current wording

Cost of revenue for the three months ended June 30, 2025 was $229.8 million, an increase of $16.4 million, or 7.7%, compared to the prior-year period, driven by higher net gaming revenue and revenue from our casino & racing operations, as described above.

Previous wording

Cost of manufacturing goods sold for the three months ended March 31, 2025 was $2.1 million, an increase of $0.9 million, or 79.1%, compared to the prior-year period .

Current wording

Cost of manufacturing goods sold for the three months ended June 30, 2025 was $0.9 million, a decrease of $2.3 million, or 72.0%, compared to the prior-year period due to lower manufacturing revenue, as described above.

Previous wording

Depreciation and amortization of property and equipment for the three months ended March 31, 2025 was $12.3 million, an increase of $1.9 million, or 17.9%, compared to the prior-year period due to an increased number of gaming terminals.

Current wording

Depreciation and amortization of property and equipment for the three months ended June 30, 2025 was $13.1 million, an increase of $2.3 million, or 21.3%, compared to the prior-year period due to an increased number of gaming terminals.

Previous wording

Amortization of intangible assets and route and customer acquisition costs for the three months ended March 31, 2025 were $6.3 million, an increase of $0.9 million, or 15.7%, compared to the prior-year period due to higher amortization expenses on location contracts acquired.

Current wording

Amortization of intangible assets and route and customer acquisition costs for the three months ended June 30, 2025 were $6.3 million, an increase of $0.7 million, or 13.1%, compared to the prior-year period due to higher amortization expenses on location contracts acquired.

Previous wording

Interest expense, net for the three months ended March 31, 2025 was $8.7 million, which was essentially flat compared to the prior-year period. We experienced an increase in average outstanding debt, which was offset by lower interest expense. For the three months ended March 31, 2025, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 6.5% compared to 7.7% in the prior-year period.

Current wording

Interest expense, net for the three months ended June 30, 2025 was $8.8 million, which was essentially flat compared to the prior-year period. We experienced an increase in average outstanding debt, which was offset by lower interest rates and the benefit realized on our interest rate caplets. For the three months ended June 30, 2025, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 6.5% compared to 7.7% in the prior-year period.

Previous wording

The change in the fair value of contingent earnout shares for the three months ended March 31, 2025 was a gain of $2.4 million, compared to a loss of $4.7 million the prior-year period. The change was primarily due to the change in the market value of our Class A-1 common stock, which is the primary input to the valuation of the contingent earnout shares.

Current wording

The change in the fair value of contingent earnout shares for the three months ended June 30, 2025 was a loss of $5.7 million, compared to a gain of $4.7 million the prior-year period. The change was primarily due to the change in the market value of our Class A-1 common stock, which is the primary input to the valuation of the contingent earnout shares.

Previous wording

Income tax expense for the three months ended March 31, 2025 was $5.0 million, an increase of $0.2 million, or 4.7%, compared to the prior-year period. The effective tax rate for the three months ended March 31, 2025 was 25.5% compared to 39.1% in the prior-year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.

Current wording

Income tax expense for the three months ended June 30, 2025 was $5.1 million, an increase of $1.2 million, or 29.4%, compared to the prior-year period. The effective tax rate for the three months ended June 30, 2025 was 41.2% compared to 21.2% in the prior-year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.

Previous wording

Total net revenues for the three months ended March 31, 2025 were $323.9 million, an increase of $22.1 million, or 7.3%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $13.8 million, which reflected an increase in gaming locations and terminals, and higher ATM fees and other revenue of $12.2 million, an increase of $6.9 million, or 128.3%, which included revenue from our racing operations. Net revenues by state are presented below:

Current wording

Total net revenues for the six months ended June 30, 2025 were $659.8 million, an increase of $48.6 million, or 7.9%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $34.5 million, which reflected an increase in gaming locations and terminals and higher ATM fees and other revenue of $26.9 million, an increase of $16.1 million, or 149.9%, which included revenue from our casino & racing operations. Net revenues by state are presented below:

Previous wording

General and administrative expenses for the three months ended March 31, 2025 were $53.0 million, an increase of $5.4 million, or 11.3%, compared to the prior-year period. The increase was attributable to higher compensation-related costs, as we continue to grow our operations, partially offset by lower parts and repair expense.

Current wording

General and administrative expenses for the six months ended June 30, 2025 were $107.9 million, an increase of $13.7 million, or 14.6%, compared to the prior-year period. The increase was attributable to compensation-related costs, as we continue to grow our operations, partially offset by lower parts and repair expense.

Previous wording

Other expenses, net for the three months ended March 31, 2025 were $2.8 million, an increase of $0.4 million, or 16.1%, compared to the prior-year period. The increase was primarily attributable to higher non-recurring expenses related to acquisitions.

Current wording

Other expenses, net for the six months ended June 30, 2025 were $6.9 million, a decrease of $2.8 million, or 29.1%, compared to the prior-year period. The decrease was primarily attributable to lower fair value adjustments associated with the revaluation of contingent consideration liabilities, partially offset by higher non-recurring expenses related to acquisitions.

Previous wording

The following tables set forth information with respect to our location hold-per-day in our primary locations for the three months ended:

Current wording

The following tables set forth information with respect to our location hold-per-day in our primary locations for the three and six months ended:

Previous wording

Adjusted EBITDA for the three months ended March 31, 2025, was$49.5 million, an increase of $3.3 million, or 7.1%, compared to the prior-year period. The increase was attributable to an increase in the number of locations and gaming terminals.

Current wording

Adjusted EBITDA for the three months ended June 30, 2025, was$53.2 million, an increase of $3.5 million, or 7.1%, compared to the prior-year period. Adjusted EBITDA for the six months ended June 30, 2025, was$102.7 million, anincrease of$6.8 million, or 7.1%, compared to the prior-year period. The increase was attributable to an increase in the number of locations and gaming terminals.

Previous wording

We believe that our cash and cash equivalents, cash flows from operations and borrowing availability under the Credit Agreement (as defined below) will be sufficient to meet our capital requirements for the next twelve months. Our primary short-term cash needs are paying operating expenses and contingent earnout payments, purchases of property and equipment, servicing outstanding indebtedness, and funding our Board of Directors approved share repurchase program and near-term acquisitions. As of March 31, 2025, we had $271.9 million in cash and cash equivalents.

Current wording

We believe that our cash and cash equivalents, cash flows from operations and borrowing availability under the Credit Agreement (as defined below) will be sufficient to meet our capital requirements for the next twelve months and the foreseeable future thereafter. Our primary short-term cash needs are paying operating expenses and contingent earnout payments, purchases of property and equipment, servicing outstanding indebtedness, and funding our Board of Directors (“Board”) approved share repurchase program and near-term acquisitions. As of June 30, 2025, we had $264.6 million in cash and cash equivalents.

Previous wording

Our ability to borrow on the DDTL ended on October 22, 2024. The maturity date of the Credit Agreement is October 22, 2026.

Current wording

Our ability to borrow on the DDTL ended on October 22, 2024. The maturity date of the Credit Agreement is October 22, 2026. The Company is in the preliminary stages of refinancing its Senior Secured Credit Facility and anticipates it will do so before the debt becomes current.

Previous wording

As of March 31, 2025, there remained $150 million of availability under the Credit Agreement and the weighted-average interest rate on our borrowings under the Credit Agreement was approximately 6.5%.

Current wording

As of June 30, 2025, there remained $127 million of availability under the Credit Agreement and the weighted-average interest rate on our borrowings under the Credit Agreement was approximately 6.5%.

Previous wording

We manage our exposure to some of our interest rate risk through the use of interest rate caplets, which are derivative financial instruments. On January 12, 2022, we hedged the variability of the cash flows attributable to the changes in the 1-month SOFR interest rate on the first $300 million of the term loan under the Credit Agreement by entering into a 4-year series of 48 deferred premium caplets (“caplets”).

Current wording

We manage our exposure to some of our interest rate risk through the use of interest rate caplets, which are derivative financial instruments. On January 12, 2022, we hedged the variability of the cash flows attributable to the changes in the 1-month SOFR interest rate on the first $300 million of the term loan under the Credit Agreement by entering into a 4-year series of 48 deferred premium caplets (“caplets”), which are set to expire in January 2026.

Previous wording

We recognized anunrealized loss, net of taxes, on the change in fair value of the caplets of$1.1 million for the three months ended March 31, 2025. In comparison, we recognized an unrealized gain of$1.1 million, net of taxes, for the three months ended March 31, 2024. We also recognized interest income on the caplets of$1.8 million and$2.6 million for the three months ended March 31, 2025 and 2024, respectively, which are reflected in interest expense, netin the condensed consolidated statements of operations and other comprehensive income.

Current wording

We recognized anunrealized loss, net of taxes, on the change in fair value of the caplets of$0.8 million and $2.0 million for the three and six months ended June 30, 2025. In comparison, we recognized an unrealized loss, net of taxes, of$1.1 million and an unrealized gain of less than $0.1 million for the three and six months ended June 30, 2024. We also recognized interest income on the caplets of$1.8 million and$3.6 millionfor thethree and six months ended June 30, 2025, respectively. In comparison, we recognized interest income on the caplets of$2.5 million and$5.1 million for thethree and six months ended June 30, 2024, respectively. These amounts are reflected in interest expense, netin the condensed consolidated statements of operations and other comprehensive income.

Previous wording

For the three months ended March 31, 2025, net cash provided by operating activities was $44.8 million, an increase in cash of $16.0 million compared to the prior-year period due primarily to changes in working capital adjustments.

Current wording

For the six months ended June 30, 2025, net cash provided by operating activities was $64.6 million, an increase in cash of $6.9 million compared to the prior-year period due primarily to changes in working capital adjustments.

Previous wording

For the three months ended March 31, 2025, net cash used in investing activities was $26.2 million, an increase in cash of $0.3 million compared to the prior-year period. The increase in cash was primarily attributable to higher purchases of property and equipment, partially offset by less cash used for business and asset acquisitions. We anticipate our capital expenditures will be approximately $75–80 million in 2025, of which $31–32 million relates to Fairmount, $5–7 million relates to Louisiana and the remaining $39–41 million for all other capital expenditures.

Current wording

For the six months ended June 30, 2025, net cash used in investing activities was $60.0 million, a decrease in cash used of $9.4 million compared to the prior-year period. The decrease in cash used was primarily attributable to less cash used for acquisitions and an investment in an unconsolidated affiliate in the prior year, partially offset by higher purchases of property and equipment and an acquisition of an indefinite-lived operating license at Fairmount. We anticipate our capital expenditures will be approximately $75-80 million in 2025, of which $31-32 million relates to Fairmount, $5-7 million relates to Louisiana and the remaining $39-41 million for all other capital expenditures.

Previous wording

For the three months ended March 31, 2025, net cash used in financing activities was $27.9 million, an increase in cash used of $17.4 million compared to the prior-year period. The change reflects higher net repayments on our debt and higher stock repurchases.

Current wording

For the six months ended June 30, 2025, net cash used in financing activities was $21.3 million, an increase in cash used of $26.3 million compared to the prior-year period. The change reflects higher net repayments on our debt compared to a net borrowing in the prior-year period and higher repurchases of our common stock.

Previous wording

Our results of operations can fluctuate due to seasonal trends and other factors. For example, the gross revenue per machine per day is typically lower in the summer when players will typically spend less time indoors at our locations, and higher in cold weather between February and April, when players will typically spend more time indoors at our locations. Our horse racing operations only operate during the months where the weather is conducive to racing, which is typically from late spring through the early fall. Holidays, vacation seasons, and sporting events may also cause our results to fluctuate.

Current wording

Our results of operations can fluctuate due to seasonal trends and other factors. For example, the gross revenue per gaming terminal per day is typically lower in the summer when players will typically spend less time indoors at our locations, and higher in cold weather between February and April, when players will typically spend more time indoors at our locations. Our horse racing operations only operate during the months where the weather is conducive to racing, which is typically from late spring through the early fall. Holidays, vacation seasons, and sporting events may also cause our results to fluctuate.