Following the release of its quarterly operating results, Accel Entertainment, Inc. (NYSE: ACEL) shares are experiencing a notable rise on the US stock charts. As of the last check during current-market session, ACEL stock was surging 6.50% to $11.80.
Financial Performance
The company achieved another record-setting quarter, reinforcing the robustness of its local, convenience-based gaming model. Accel Entertainment is well-positioned to generate good returns on capital in the low teens and improve its trading multiples as it expands its portfolio and strengthens its core business. This makes Accel Entertainment an appealing investment opportunity.
For the second quarter of 2024, Accel Entertainment announced record revenues of $309.4 million, up 5.7% from the same period the previous year. Additionally, net income increased significantly, rising to $14.6 million, a 46.1% increase from the previous year.
Strategic Acquisition of Fairmount
Accel Entertainment announced that it will acquire FanDuel Sportsbook & Horse Racing’s parent business, Fairmount, in an effort to strengthen its position in the market. The projected $35 million transaction will be financed by the issuance of 3.45 million Accel Class A-1 common stock shares.
The acquisition includes a promising single-site racetrack and future casino, which will expand Accel’s convenience gaming expertise into a larger and more concentrated venue. Fairmount, which generated $29 million in revenue and modest Adjusted EBITDA for the year ending December 31, 2023, will be integrated into Accel’s growing local gaming platform.
Accel plans to invest between $85 and $95 million to fund both temporary and permanent casino construction, as well as to make modest improvements to the track.
Future Prospects and Investment Strategy of Accel
Accel’s five-year forecast anticipates an Adjusted EBITDA potential of $20 to $25 million, with over 75% free cash flow conversion, indicating a strong cash flow return on capital. This asset is expected to become a cornerstone of Accel’s local gaming platform, enhancing its capabilities as a leading route-based operator.
The company expects the acquisition to accelerate its long-term financial model with high return growth and accretive margins. Initial buildout costs will be covered by Accel’s existing revolver facility.
