Accel Entertainment (NYSE:ACEL) Surprises With Q2 Sales

Slot machine and terminal operator Accel Entertainment (NYSE:ACEL) reported Q2 CY2024 results topping analysts’ expectations , with revenue up 5.7% year on year to $309.4 million. It made a GAAP profit of $0.17 per share, improving from its profit of $0.11 per share in the same quarter last year.

Is now the time to buy Accel Entertainment? Find out in our full research report.

Accel Entertainment (ACEL) Q2 CY2024 Highlights:

• Revenue: $309.4 million vs analyst estimates of $301.3 million (2.7% beat)

• EPS: $0.17 vs analyst estimates of $0.15 (10.6% beat)

• Gross Margin (GAAP): 31.1%, up from 30.1% in the same quarter last year

• Video Gaming Terminals Sold: 25,757, up 1,998 year on year

• Market Capitalization: $907.1 million

Accel CEO Andy Rubenstein commented, “I am happy to report that we delivered another record-setting quarter, continuing to demonstrate the strength of our local, convenience-based gaming model. We are excited to leverage our strengths in catering to local markets with our announcement to acquire the FanDuel Sportsbook & Horse Racing, a single-site, easily accessible, local gaming venue and a natural extension of our route-based gaming platform. As we continue to strengthen our core and expand our offerings, we believe we can continue to generate attractive low-teens returns on capital and improve our trading multiples, making Accel a compelling investment opportunity.”

Established in Illinois, Accel Entertainment (NYSE:ACEL) is a provider of electronic gaming machines and interactive amusement terminals to bars and entertainment venues.

Gaming Solutions

Gaming solution companies operate in a dynamic and evolving market, and the digital transformation of the gaming industry presents significant opportunities for innovation and growth, whether it be immersive slot machine terminals or mobile sports betting. However, the gaming solution industry is not without its challenges. Regulatory compliance is a crucial consideration as companies must navigate a complex and often fragmented regulatory landscape across different jurisdictions. Changes in regulations can impact product offerings, operational practices, and market access, requiring companies to maintain flexibility and adaptability in their business strategies. Additionally, the competitive nature of the industry necessitates continuous investment in research and development to stay ahead of competitors and meet evolving consumer demands.

Sales Growth

A company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Luckily, Accel Entertainment’s sales grew at an excellent 26.2% compounded annual growth rate over the last five years. This shows it expanded quickly, a useful starting point for our analysis.

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We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Accel Entertainment’s annualized revenue growth of 21.5% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong.

Accel Entertainment also discloses its number of video gaming terminals sold, which reached 25,757 in the latest quarter. Over the last two years, Accel Entertainment’s video gaming terminals sold averaged 30.7% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, Accel Entertainment reported solid year-on-year revenue growth of 5.7%, and its $309.4 million of revenue outperformed Wall Street’s estimates by 2.7%. Looking ahead, Wall Street expects sales to grow 2.3% over the next 12 months, a deceleration from this quarter.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Accel Entertainment’s operating margin has been trending down over the last year and averaged 8.8%. Although this result isn’t good, the company’s top-notch revenue growth suggests it ramped up investments to capture market share. We’ll keep a close eye to see if this strategy pays off.

In Q2, Accel Entertainment generated an operating profit margin of 7.3%, down 2.6 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.

Key Takeaways from Accel Entertainment’s Q2 Results

It was good to see Accel Entertainment beat analysts’ revenue and EPS expectations this quarter. The company also announced the acquisition of Fairmount Holdings. Overall, the quarter was fine, but the stock traded down 3.8% to $10.66 immediately following the results.

So should you invest in Accel Entertainment right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.