ARDELYX, INC. Q3 FY2026 earnings call

• Core Business Strength: Illinois performance improved despite operating fewer locations and terminals, driven by route optimization, better content deployment, and higher-quality locations.
• Diversified Growth: Expansion in Georgia, Nebraska, and Louisiana provides diversified earnings quality. Chicago is launching with first licenses secured; expected to add 100-200 locations annually.
• Strategic Leadership: Completed senior leadership team appointments including COO, CCO, CPO, and CSO to support execution.
• Capital Allocation: Strong balance sheet with low leverage. Repurchased ~624k shares in Q3 ($7M). Focus on organic investment, disciplined M&A, and shareholder returns.
• Operational Leverage: Revenue growth consistently outpaces cost increases, demonstrating operating leverage. Cash flow generation remains robust, supporting reinvestment and debt reduction.
• Product Development: Grand Vision Gaming’s new Cobra cabinet expected to ship before year-end.

Consolidated revenue increased 10% year-over-year to $364 million, with adjusted EBITDA rising 12% to $57 million. Net income was $21 million (up ~55% YoY). Illinois (excluding Fairmont Park) contributed significant base growth with a 7% revenue increase and 9% hold-per-day increase, representing the core stable market. Nevada saw a 25.4% revenue surge driven by new convenience store footprints, though hold-per-day declined ~16% due to lower-margin lease structures. Georgia reported strong momentum with 42% revenue growth and 25% hold-per-day growth. Nebraska was the highest performer for efficiency, with 42% revenue growth and 32% hold-per-day growth. Louisiana showed 20% revenue growth with earnings scaling faster than top-line. Fairmont Park gaming revenue jumped 84% YoY following table game introductions.

• Chicago Ramp-Up: Management expects to add approximately 100 to 200 locations annually in Chicago over the next several years, targeting a long-term share of one-third of the estimated 2,500 licensable locations. Full ramp may take 4-8 years depending on regulatory speed.
• Fairmont Park Economics: Updated annualized EBITDA expectation for the permanent casino from prior estimates to $20-$25 million. Construction costs are now projected to be 15-20% higher than the initial $80 million estimate, though timing remains unchanged.
• Content Strategy: Expect incremental benefits from new content in Nebraska to normalize as competition enters, but attractive deployment opportunities remain.
• General Outlook: No specific full-year financial guidance provided, but management emphasized continued earnings growth ahead of consensus and sustained free cash flow generation.

• Regulatory Dependency: Chicago expansion is heavily dependent on the Illinois Gaming Board’s licensing speed and city-specific alderman approvals, which could delay or limit location rollout.
• Cost Inflation: Permanent casino construction costs at Fairmont Park exceeded expectations by 15-20%, impacting capital requirements.
• Market Saturation/Competition: In Nebraska, newer content benefits may normalize as competitors enter the market, potentially stabilizing hold-per-day metrics.
• Macroeconomic Sensitivity: While largely insulated, Las Vegas markets show demand decline linked to broader tourism trends; however, local-focused markets remain resilient.
• Execution Risk: Rapid expansion into Chicago requires managing logistical, onboarding, and operational complexities across hundreds of new sites.

Q: Jeremy Jacoby asked about the Illinois Gaming Board's proposed cashless gaming rules, specifically regarding CapEx implications and timing. / A: Mark Phelan noted that while the rules (including self-exclusion) are positive for safety and loyalty systems, they will require significant CapEx investment. The industry is providing feedback on form factors, and implementation is expected to happen gradually over time rather than immediately.

Q: David Bain inquired about the immediate runway for Chicago launches and potential bottlenecks limiting the 100-200 location annual cap. / A: Management stated that historical Illinois licensing averages ~1,300-1,400 locations. Chicago’s process is more complex due to city-level alderman approvals. They view 100-200 locations/year as a reasonable first-year estimate, contingent on the Illinois Gaming Board’s processing capacity and potential labor shifts to clear backlogs.

Q: Chad Bannon questioned whether macroeconomic headwinds were affecting Illinois and what could disrupt their inflation-beating growth. / A: Mark Phelan highlighted that only Las Vegas shows weakness; all other local markets remain robust because Accel serves as the 'last mile' for gambling dollars, insulating it from macro trends. Brett Sommer added that sustainability relies on continuous capital investment in content/machines and aggressive sales retention/acquisition efforts.

Q: Greg Eubus asked for clarification on Chicago’s long-term location count and ramp timeline. / A: Management clarified that while the city study suggests 3,500 possible locations, ~2,500 are likely licensable. Accel targets ~1/3 of this (~700-900 locations). At 100-200/year, this implies a 4-8 year ramp, subject to regulatory approval speeds and political nuances in ward-based licensing.

Q: Max Marsh sought details on Nebraska’s strong hold-per-day growth and Nevada’s mixed performance. / A: Nebraska’s success is driven by superior content offerings and professional one-stop-shop services attracting high-traffic locations, though competition is emerging. Nevada’s 25% revenue growth includes lower-margin convenience store leases (Green Valley/Rebel), which dilute hold-per-day metrics but offer attractive margin economics over time.