Accel Entertainment's Q3 Net Income Soars 173% on Strong Gaming, ATM Growth

TL;DR

**ACEL is crushing it with massive net income growth, making it a strong buy in the distributed gaming space.**

AI Summary

Accel Entertainment, Inc. (ACEL) reported a significant increase in net income for the three and nine months ended September 30, 2025. Net income attributable to Accel Entertainment, Inc. surged to $13.364 million for the three months ended September 30, 2025, up from $4.895 million in the prior year, representing a 173% increase. For the nine months, net income attributable to ACEL rose to $35.318 million from $26.897 million, a 31.3% increase. Total net revenues for the three months increased by 9.1% to $329.693 million from $302.227 million, driven primarily by a 6.4% increase in net gaming revenue to $308.481 million and a substantial 164.9% increase in ATM fees and other revenue to $14.557 million. Operating income also saw a healthy increase, reaching $25.361 million for the quarter, up from $21.845 million in the same period last year. The company's cash and cash equivalents increased to $290.235 million as of September 30, 2025, from $281.305 million at December 31, 2024. Key business changes include an investment of $5.0 million in HBC Gaming LLC for a 5% equity interest and obligations to fund additional equity investments up to $6.5 million for a 10% ownership. Risks include the loss on debt extinguishment of $1.090 million for both the three and nine months ended September 30, 2025, and an unrealized loss on interest rate caplets of $1.063 million for the quarter. The strategic outlook appears focused on expanding its distributed gaming operations and exploring new market opportunities through investments like HBC Gaming LLC.

Why It Matters

This strong performance from Accel Entertainment signals robust demand in the distributed gaming sector, which could attract more investor interest in the niche market. For employees, continued growth and expansion into new states like those mentioned in the filing (Illinois, Montana, Nevada, Nebraska, Georgia, Iowa, Louisiana, South Dakota, West Virginia, and Pennsylvania) could mean job security and opportunities. Customers benefit from expanded access to gaming and ATM services in non-casino locations. In a competitive landscape, Accel's ability to significantly grow revenue and net income, particularly in ATM fees and other services, demonstrates effective diversification and operational efficiency, potentially putting pressure on smaller regional competitors.

Risk Assessment

Risk Level: medium — The company reported a loss on debt extinguishment of $1.090 million for both the three and nine months ended September 30, 2025, indicating potential refinancing activities or debt restructuring that could carry associated costs. Additionally, an unrealized loss on interest rate caplets of $1.063 million for the three months ended September 30, 2025, and $3.026 million for the nine months, suggests exposure to interest rate volatility, which could impact future profitability.

Analyst Insight

Investors should consider ACEL's strong revenue and net income growth, particularly the significant increase in ATM fees and other revenue, as a positive indicator. However, they should also monitor the company's debt management strategies and exposure to interest rate fluctuations, as evidenced by the debt extinguishment loss and unrealized losses on interest rate caplets.

Financial Highlights

revenue

$329,693,000

operating Margin

7.7%

net Income

$13,364,000

eps

$0.16

cash Position

$290,235,000

revenue Growth

+9.1%

Revenue Breakdown

Key Numbers

• $13.364M — Net income attributable to Accel Entertainment, Inc. (Increased 173% for the three months ended September 30, 2025, compared to $4.895 million in 2024.)
• $35.318M — Net income attributable to Accel Entertainment, Inc. (Increased 31.3% for the nine months ended September 30, 2025, compared to $26.897 million in 2024.)
• $329.693M — Total net revenues (Increased 9.1% for the three months ended September 30, 2025, compared to $302.227 million in 2024.)
• $989.514M — Total net revenues (Increased for the nine months ended September 30, 2025, compared to $913.457 million in 2024.)
• $308.481M — Net gaming revenue (Increased 6.4% for the three months ended September 30, 2025, compared to $289.923 million in 2024.)
• $14.557M — ATM fees and other revenue (Increased 164.9% for the three months ended September 30, 2025, compared to $5.495 million in 2024.)
• $25.361M — Operating income (Increased for the three months ended September 30, 2025, compared to $21.845 million in 2024.)
• $1.090M — Loss on debt extinguishment (Reported for both the three and nine months ended September 30, 2025.)
• $1.063M — Unrealized loss on interest rate caplets (Reported for the three months ended September 30, 2025.)
• $5.0M — Investment in HBC Gaming LLC (Initial equity investment made on June 17, 2024.)

Key Players & Entities

• Accel Entertainment, Inc. (company) — registrant
• HBC Gaming LLC (company) — unconsolidated affiliate
• New York Stock Exchange (regulator) — exchange where ACEL is registered
• SEC (regulator) — Securities and Exchange Commission
• Illinois (location) — state of operation
• Montana (location) — state of operation
• Nevada (location) — state of operation
• Nebraska (location) — state of operation
• Georgia (location) — state of operation
• Iowa (location) — state of operation

FAQ

Risk Factors

• Loss on Debt Extinguishment [medium — financial]: The company reported a loss on debt extinguishment of $1.090 million for both the three and nine months ended September 30, 2025. This indicates costs associated with retiring or modifying existing debt.
• Unrealized Loss on Interest Rate Caplets [low — financial]: A $1.063 million unrealized loss on interest rate caplets was recorded for the three months ended September 30, 2025. This reflects changes in the fair value of financial instruments used to hedge interest rate risk.
• Dependence on Gaming Revenue [high — operational]: The majority of Accel's revenue comes from net gaming, making the company susceptible to changes in gaming regulations, consumer spending on gaming, and competition within the distributed gaming market.
• Investment in HBC Gaming LLC [medium — market]: The $5.0 million investment in HBC Gaming LLC for a 5% equity interest, with obligations for further investment, introduces market and integration risks associated with new ventures and potential dilution.
• Evolving Gaming Regulations [high — regulatory]: Changes in state and local regulations governing video gaming terminals (VGTs) and distributed gaming operations can significantly impact the company's business model, profitability, and expansion opportunities.

Industry Context

Accel Entertainment operates in the highly regulated distributed gaming sector, primarily in Illinois. The industry is characterized by a fragmented market of operators and a growing acceptance of VGTs. Key trends include technological advancements in gaming machines, evolving regulatory landscapes, and consolidation among operators seeking economies of scale and market expansion.

Regulatory Implications

The company's operations are heavily influenced by state and local gaming regulations, particularly in Illinois. Changes to licensing requirements, tax rates, or operational restrictions can materially impact revenue and profitability. Accel must maintain strict compliance with all applicable gaming laws to avoid penalties and ensure continued operation.

What Investors Should Do

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Key Dates

• 2025-09-30: Quarterly Financial Reporting — Reported a 173% increase in net income attributable to Accel Entertainment, Inc. and a 9.1% increase in total net revenues, demonstrating strong operational performance.
• 2025-09-30: Balance Sheet Date — Cash and cash equivalents increased to $290.235 million, indicating a healthy liquidity position.
• 2024-12-31: Prior Year End Balance Sheet — Provided a baseline for comparison, showing an increase in cash and cash equivalents from $281.305 million.
• 2024-06-17: Investment in HBC Gaming LLC — Marked a strategic move into new market opportunities, involving an initial $5.0 million investment and future funding commitments.

Glossary

Net gaming revenue

Revenue generated from the operation of video gaming terminals (VGTs) and other gaming activities. (This is the primary revenue stream for Accel Entertainment, and its growth is crucial for overall financial performance.)

ATM fees and other revenue

Revenue derived from ATM transaction fees and other miscellaneous income sources. (This segment showed exceptionally high growth, contributing significantly to the company's top-line increase.)

Loss on debt extinguishment

A loss recognized when a company repays or retires debt before its scheduled maturity date, often involving fees or penalties. (This represents a non-recurring expense that impacted net income for the period.)

Interest rate caplets

Financial instruments that protect a borrower against rising interest rates by setting a maximum interest rate on a loan. (Unrealized gains or losses on these instruments can affect comprehensive income, as seen in the filing.)

Redeemable noncontrolling interests

Interests in subsidiaries that are redeemable at the option of the holder, requiring the company to potentially buy back these interests. (Net losses attributed to these interests are subtracted to arrive at net income attributable to Accel Entertainment, Inc.)

Year-Over-Year Comparison

Accel Entertainment demonstrated robust year-over-year performance. Total net revenues increased by 9.1% to $329.693 million for the quarter, driven by a 6.4% rise in net gaming revenue and a remarkable 164.9% surge in ATM fees and other revenue. Net income attributable to Accel Entertainment, Inc. saw a substantial 173% increase to $13.364 million. Operating income also grew, reflecting improved operational efficiency. The company's cash position strengthened, while it also incurred a $1.090 million loss on debt extinguishment, a new item compared to the prior year's comparable period.

Filing Documents

• acel-20250930.htm (10-Q) — 1551KB
• accelexhibit3119302025.htm (EX-31.1) — 8KB
• accelexhibit3129302025.htm (EX-31.2) — 8KB
• accelexhibit3219302025.htm (EX-32.1) — 5KB
• accelexhibit3229302025.htm (EX-32.2) — 5KB
• 0001698991-25-000051.txt ( ) — 8029KB
• acel-20250930.xsd (EX-101.SCH) — 54KB
• acel-20250930_cal.xml (EX-101.CAL) — 94KB
• acel-20250930_def.xml (EX-101.DEF) — 275KB
• acel-20250930_lab.xml (EX-101.LAB) — 667KB
• acel-20250930_pre.xml (EX-101.PRE) — 466KB
• acel-20250930_htm.xml (XML) — 1037KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 1

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS 1 Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2025 and 2024 1 Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2025 and December 31, 2024 2 Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30, 2025 and 2024 3 Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2025 and 2024 5 Notes to the Condensed Consolidated Financial Statements (Unaudited) 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 29

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 45

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 45

OTHER INFORMATION

PART II. OTHER INFORMATION 46

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 46

RISK FACTORS

ITEM 1A. RISK FACTORS 46

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 46

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 47

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES 47

OTHER INFORMATION 47

ITEM 5. OTHER INFORMATION 47

EXHIBITS

ITEM 6. EXHIBITS 48

SIGNATURES

SIGNATURES 49 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS. ACCEL ENTERTAINMENT, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net revenues: Net gaming $ 308,481 $ 289,923 $ 924,351 $ 871,300 Amusement 4,977 5,104 16,402 16,772 Manufacturing 1,678 1,705 7,299 9,122 ATM fees and other 14,557 5,495 41,462 16,263 Total net revenues 329,693 302,227 989,514 913,457 Operating expenses: Cost of revenue (exclusive of depreciation and amortization expense shown below) 225,511 210,841 676,741 633,325 Cost of manufacturing goods sold (exclusive of depreciation and amortization expense shown below) 916 962 3,878 5,283 General and administrative 55,600 47,930 163,482 142,105 Depreciation and amortization of property and equipment 13,339 11,001 38,735 32,229 Amortization of intangible assets and route and customer acquisition costs 6,389 5,781 19,001 16,808 Other expenses, net 2,577 3,867 9,490 13,620 Total operating expenses 304,332 280,382 911,327 843,370 Operating income 25,361 21,845 78,187 70,087 Interest expense, net 8,622 9,164 26,078 26,730 Loss from unconsolidated affiliates 22 1 55 1 (Gain) loss on change in fair value of contingent earnout shares ( 2,170 ) 4,216 1,209 4,190 Loss on debt extinguishment 1,090 — 1,090 — Income before income tax expense 17,797 8,464 49,755 39,166 Income tax expense 4,492 3,569 14,575 12,269 Net income $ 13,305 $ 4,895 $ 35,180 $ 26,897 Less: Net loss attributed to redeemable noncontrolling interests ( 59 ) — ( 138 ) — Net income attributable to Accel Entertainment, Inc. $ 13,364 $ 4,895 $ 35,318 $ 26,897 Earnings per common share: Basic $ 0.16 $ 0.06 $ 0.41 $ 0.32 Diluted 0.16 0.06 0.41 0.32 Weighted average number of common shares outstanding: Basic 84,719 82,952 85,289 83,718 Diluted 86,087 84,322 86,563 84,890 Comprehensive income Net income $ 13,305 $ 4,