ACEL 10-K & 10-Q changes, risk factors and insider trading
Accel Entertainment, Inc. · NYSE · Services-Amusement & Recreation Services · CIK 1698991 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our revenue growth and future success depends on successfully entering and scaling in new markets and introducing new and appealing products and services amid uncertain market demand and regulatory outcomes, none of which is assured.”
New heading “Our results of operations are highly sensitive to discretionary consumer spending and broader macroeconomic and socio-political conditions; our concentration in Illinois, Montana and Nevada heightens exposure to local conditions.”
New heading “Our operations have historically been subject to seasonal fluctuations in operating results, and we can expect to experience such fluctuations in the future.”
New heading “Our success depends on the security, integrity and regulatory compliance of our products, services and systems; technical incidents, cyber events, product defects or integrity failures could result in regulatory action, liability and reputational harm.”
New heading “Provisions in our Charter and Bylaws designate certain state and federal courts as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders or that arise under the Securities Act, which may discourage stockholders from bringing such claims.”
Removed heading “Our success depends on our ability to offer new and innovative products and services that fulfill the needs of location partners and create strong and sustained player appeal.”
Removed heading “We are dependent on relationships with key manufacturers, developers and third parties to obtain gaming terminals, amusement machines, and related supplies, programs, and technologies for our business on acceptable terms.”
Removed heading “Our future results of operations may be negatively impacted by slow growth in demand for gaming terminals and by the slow growth of new gaming jurisdictions.”
Removed heading “Unfavorable economic conditions or decreased discretionary spending due to other factors such as terrorist activity or threat thereof, epidemics, pandemics or other public health issues, civil unrest or other economic or political uncertainties, may adversely affect our business, results of operations, cash flows and financial condition.”
Removed heading “Our revenue growth and future success depends on our ability to expand into new markets, which may not occur as anticipated or at all. In addition, we may expand into new businesses, which may subject us to additional risks.”
Removed heading “Our business is geographically concentrated, which subjects us to greater risks from changes in local or regional conditions.”
Removed heading “We operate in the highly competitive gaming industry, and our success depends on our ability to effectively compete with numerous types of businesses in a rapidly evolving, and potentially expanding, gaming environment.”
Removed heading “The concentration and evolution of the gaming terminal manufacturing industry could impose additional costs on us.”
Removed heading “Our success depends on the security and integrity of the systems and products offered, and security breaches, including cybersecurity breaches, or other disruptions could compromise certain information and expose us to liability, which could cause our business and reputation to suffer.”
Removed heading “Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.”
Removed heading “The market price and trading volume of Class A-1 common stock may be volatile and could decline significantly.”
Removed heading “Provisions in our Charter designate the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and provisions in our Bylaws also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act which could limit the ability of our stockholders to obtain a favorable judicial forum for disputes with us or with our directors, officers or employees and may discourage stockholders from bringing such claims.”
Removed heading “Resales of the securities, or issuances of Class A-1 common stock following the conversion of Class A-2 common stock could depress the market price of our Class A-1 common stock.”
Largest changes
“Unfavorable economic conditions, including a recession, economic slowdown, decreased liquidity in the financial markets, decreased availability of credit, interest rate volatility and labor shortages, or inflation or stagflation, could have a negative effect on our business. Unfavorable economic conditions could cause location partners to shut down or ultimately declare bankruptcy, which could adversely affect our business. Unfavorable economic conditions may also result in volatility in the credit and equity markets. For example, U.S. …”see in full comparison
“Our revenue is largely driven by players’ disposable incomes and level of gaming activity at our location partners. …”see in full comparison
“We believe that our success depends, in large part, on providing secure products, services and systems to locations and players, and on the ability to avoid, detect, replicate and correct software and hardware anomalies and fraudulent manipulation of products and services. Our business sometimes involves the storage, processing and transmission of proprietary, confidential and personal information, and any future player program we may institute will also involve such information. …”see in full comparison
“The New Credit Facility contains customary affirmative and negative covenants including limitations on the ability of the Company, the Borrower, and their restricted subsidiaries to, amongst other things, grant additional liens, incur additional indebtedness, merge or consolidate, dispose of assets, engage in certain transactions with affiliates, and make restricted payments. …”see in full comparison
“Actual events involving reduced or limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide credit and liquidity problems. Instability in the U.S. …”see in full comparison
“Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.”see in full comparison
Full comparison: every changed paragraph (182)
Below is a summary of the principal factors that make an investment in our Class A-1 common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our Class A-1 common stockstock.
•Our ability to operate in existing markets and to expand into new jurisdictions depends on obtaining, maintaining and renewing a complex set of licenses and regulatory approvals, which vary widely by jurisdiction and can be extensive.
•Our revenue growth and future success depends on successfully entering and scaling in new markets and introducing new and appealing products and services amid uncertain market demand and regulatory outcomes, none of which is assured.
•We operate in the highly competitive and evolving gaming and entertainment landscape, and our ability to sustain growth depends on maintaining our competitive position across distributed gaming and adjacent areas of entertainment.
•Our operating results are likely to vary significantly and be unpredictable.
•Our success depends on our ability to offer new and innovative products and services that fulfill the needs of location partners and create strong and sustained player appeal.
•We are dependent on relationshipsa withconcentrated network of key manufacturers, developers and third partiesparty toproviders obtainfor gaming terminals, amusement machines, and related supplies,software, programs,content, and technologies for our business on acceptable terms.technologies.
•Our future results of operations may be negatively impacted by slow growth in demand for gaming terminals and by the slow growth of new gaming jurisdictions and related regulations.
•Our expansion into casino operations and horse racing may not be successful.
•Our results of operations are highly sensitive to discretionary consumer spending and broader macroeconomic and socio-political conditions; our concentration in Illinois, Montana and Nevada heightens exposure to local conditions.
•Adverse economic conditions or decreased discretionary spending may adversely impact our business.
•Our ability to operate in existing markets or expand into new jurisdictions could be adversely affected by difficulties, delays, or failures by us or our stakeholders in obtaining or maintaining required licenses or approvals.
•Our business is geographically concentrated, which subjects us to greater risks from changes in local or regional conditions. Our revenue growth and future success depends on our ability to expand into new markets, which may not occur as anticipated or at all.
•Our industry is highly competitive and we must accurately predict, prepare for and respond promptly to technological and market developments and changing end-customer needs, including by acquiring and integrating other businesses, products and technologies that address a fast-changing technology and threat landscape and that achieve sufficient market acceptance, in order to maintain or improve our competitive position.
•Our success depends on the security, integrity and regulatory compliance of our products, services and systems; technical incidents, cyber events, product defects or integrity failures could result in regulatory action, liability and reputational harm.
•GamingWe opponentsmay persistnot be able to capitalize on trends and changes in theirthe gaming industries, and efforts to curtail the expansion of legalized gaming, which, if successful, could limit our growth of operations.
•Our success depends on the security and integrity of the systems and products offered, and security breaches or other disruptions could compromise certain information and expose us to liability.
•Our level of indebtedness and itsthe relatedcash variablerequired interestto rate,service and any increase thereto,it could adversely affect our results of operations, cash flowsoperations and financial condition.liquidity.
•Certain stockholders own a significant portion of our Class A-1 common stockstock, and they may have interests that differ from those of other stockholders.
Our ability to operate in existing markets orand to expand into new jurisdictions coulddepends on obtaining, maintaining and renewing a complex set of licenses and regulatory approvals, which vary widely by jurisdiction and can be adversely affected by difficulties, delays, or failures by us or our stakeholders in obtaining or maintaining required licenses or approvals.extensive.
We operate only in jurisdictions where gaming is legal. Our ability to operate in existing markets and to expand into new jurisdictions depends on obtaining, maintaining, and renewing a complex set of licenses, permits, product certifications, and regulatory approvals for us and for certain of our stakeholders, that vary widely by jurisdiction and can be extensive and time-consuming. Regulators evaluate a broad range of factors—including financial stability, integrity, business experience, and the individual suitability of officers, directors, major equity holders, lenders, key employees, and business partners—and may condition, suspend, revoke, or deny required registrations, licenses, permits or approvals at any time, which could prevent us from entering or continuing to operate in affected jurisdictions and could have adverse effects on our results of operations, cash flows, and financial condition. Failures or delays by our location partners or other stakeholders in obtaining their own required licenses can likewise impede our operations and growth, and negative licensing outcomes in one state can adversely affect eligibility and approvals in others.
Gaming and horse racing laws and regulations are constantly evolving and subject to amendment, repeal, and new interpretations by authorities with broad enforcement powers, including the authority to investigate, impose fines and penalties, and restrict or revoke licenses. Adverse regulatory actions or unfavorable legislative changes, including new or increased taxes and fees, could limit existing operations, constrain our growth, or expose us to penalties. Some jurisdictions also require background checks, disclosure and suitability determinations of us and certain of our affiliates, significant stockholders, directors, officers, and key employees and nonadherence to such requirements or findings of unsuitability can jeopardize our ability to obtain or maintain licensure, require us to modify or terminate relationships with those parties or forgo doing business in those jurisdictions. Further, these licensing procedures, background investigations and suitability determination requirements may discourage potential investors or inhibit changes in existing holdings in ways that impact our strategic flexibility.
Our revenue growth and future success depends on successfully entering and scaling in new markets and introducing new and appealing products and services amid uncertain market demand and regulatory outcomes, none of which is assured.
Our revenue growth and future success depend in large part on the successful addition of new locations as partners (whether through organic growth or acquisitions) and on the entry into new markets. Our ability to succeed in new markets depends in part on displacing entrenched competitors and developing or expanding sales channels and leveraging partner relationships. In many cases, we are attempting to enter into or expand our presence in these newer markets, where the appeal and success of gaming terminals and other forms of entertainment has not yet been proven. There can be no assurance that gaming will have success with new location partners or in new markets, or that we will succeed in capturing a significant or even acceptable market share in any new markets. If we fail to successfully expand into these markets, we may have difficulty growing our business and may lose business to our competitors.
Success in new and existing markets also depends on our and our suppliers’ ability to deliver timely, creative and appealing content for gaming terminals, stand-alone ATMs, redemption devices and amusement devices that match evolving consumer preferences; however, game popularity is cyclical and unpredictable, and our suppliers face inventory, pricing and approval constraints that can limit availability or increase our costs, which could harm our ability to refresh content, retain locations, or attract new partners.
Failure to accurately anticipate the needs of location and player preferences could result in loss of business to competitors, which would adversely affect our results of operations, cash flows and financial condition. Much of the content included must receive regulatory certifications or approvals before deployment, and these approvals can be delayed or denied, limiting our ability to launch new offerings, secure placements with location partners, or expand into additional jurisdictions on anticipated timelines or at all. Beyond product expansion, we are continuously evaluating additional opportunities that are complementary to our core business, such as our acquisition of the Fairmount Park - Casino & Racing (“Fairmount”) in Collinsville, Illinois. Any acquisition of additional businesses, services, resources or assets, including gaming parlors, casinos or hospitality/retail operations, may subject us to additional risks. With any such expansion, we encounter additional industry‑specific regulatory regimes, development and construction risks, and operational complexities that could delay projects, increase capital needs, and impair anticipated returns if approvals are slow, conditions are imposed, or market acceptance does not materialize as expected.
We operate only in jurisdictions where gaming is legal. The gaming industry is subject to extensive governmental regulation by federal, state, and local governments, which customarily includes some form of licensing or regulatory screening of operators, suppliers, manufacturers and distributors and their applicable affiliates, their major stockholders, officers, directors and key employees. In addition, certain gaming products and technologies must be certified or approved in certain jurisdictions in which we operate, and these regulatory requirements vary from jurisdiction to jurisdiction. The scope of the approvals required can be extensive. Regulators review many facets of an applicant or holder of a license, including its financial stability, integrity and business experience. While the regulatory requirements vary by jurisdiction, most require:
•licenses and/or permits;
•documentation of qualifications, including evidence of financial stability;
•other required approvals for companies who design, assemble, supply or distribute gaming equipment and services; and
•individual suitability of officers, directors, major equity holders, lenders, key employees and business partners.
We may not be able to obtain or maintain all necessary registrations, licenses, permits or approvals, or could experience delays related to the licensing process which could adversely affect our operations and ability to retain key employees. If we fail to obtain a license required in a particular jurisdiction for gaming and gaming terminals, hardware or software and racing operations or have such license revoked, we will not be able to expand into, or continue doing business in, such jurisdiction. Any delay, difficulty or failure by us to obtain or retain a required license or approval in one jurisdiction could negatively impact the ability to obtain or retain required licenses and approvals in other jurisdictions, or affect eligibility for a license in other jurisdictions, which can negatively affect opportunities for growth. For example, if one of our licenses to operate in Illinois is not renewed as a result of a failure to satisfy suitability requirements or otherwise, our ability to obtain or maintain a license in Montana, Nebraska, Pennsylvania, Georgia, Louisiana, or Pennsylvania may be harmed. Unexpected changes or concessions required by local, state or federal regulatory authorities could involve significant additional costs and delay. The necessary permits, licenses and approvals may not be obtained within the anticipated time frames, or at all. Additionally, licenses, approvals or findings of suitability may be revoked, suspended or conditioned at any time. If a license, approval or finding of suitability is required by a regulatory authority and we fail to seek or do not receive the necessary approval, license or finding of suitability, or if it is granted and subsequently revoked, it could have an adverse effect on our results of operations, cash flows and financial condition.
In addition to any licensing requirements, some of our location partners are required to be licensed, and delays in or failure to obtain approvals of these licenses may adversely affect results of operations, cash flows and financial condition. We and certain of our affiliates, major stockholders (generally persons and entities beneficially owning a specified percentage (typically 5% or more) of equity securities), directors, officers and key employees are subject to extensive background investigations, personal and financial disclosure obligations and suitability standards in its businesses. Certain jurisdictions may require the same from our lenders or key business partners. The failure of these individuals and business entities to submit to such background checks and provide required disclosure, or delayed review or denial of application resulting from such submissions, could jeopardize our ability to obtain or maintain licensure in such jurisdictions, which could negatively impact our licensure in other jurisdictions and ultimately negatively affect opportunities for growth, or could require us to modify or terminate our relationship with such officers, directors, key employees or business partners, equity holders, or lenders, or forego doing business in such jurisdiction.
The licensing procedures and background investigations of the authorities that regulate our businesses may inhibit potential investors from becoming significant stockholders, inhibit existing stockholders from retaining or increasing their ownership, or inhibit existing stockholders from selling their shares to potential investors who are found unsuitable to hold our stock by gaming authorities or whose stock ownership may adversely affect our ability to obtain, maintain, renew or qualify for a license, contract, franchise or other regulatory approval from a gaming authority.
Our success depends on our ability to offer new and innovative products and services that fulfill the needs of location partners and create strong and sustained player appeal.
Our success depends upon its ability to fulfill the needs of location partners and players by offering new and innovative products and services on a timely basis. Consumer preferences for games are usually cyclical and difficult to predict, and even the most successful content remains popular for only limited periods of time, unless refreshed with new content or otherwise enhanced. If we fail to accurately anticipate the needs of location and player preferences, we could lose business to competitors, which would adversely affect our results of operations, cash flows and financial condition. We may not have the financial resources needed to introduce new products or services on a timely basis or at all.
Our business depends on content for gaming terminals, stand-alone ATMs, redemption devices, and amusement devices that is developed by third-party suppliers. We believe that creative and appealing game content results in more players visiting our location partners, which offers more revenue for location partners and provides them with a competitive advantage, which in turn enhances our revenue and ability to attract new business and to retain existing business. The success of such content is dependent on these suppliers’ ability to anticipate changes in consumer tastes, preferences and requirements and deliver to us in sufficient quantities and on a timely basis a desirable, high-quality and price-competitive mix of products. Our suppliers’ products may fail to meet the needs of location partners due to changes in consumer preference or our suppliers may be unable to maintain a sufficient inventory to satisfy the requirements of location partners. In addition, suppliers must obtain regulatory approvals for new products, and such approvals may be delayed or denied. Accordingly, we may not be able to sustain the success of our existing game content or effectively obtain, from third parties their products and services that will be widely accepted both by location partners and players.
Our suppliers may also increase their prices due to increasing demand for their products from our competitors. Further, because there exists a limited number of suppliers in the distributed gaming business, an increase in supplier pricing may limit our ability to seek alternate sources of gaming content and may result in increased operating expenses. See “Risk Factors — We are dependent on relationships with key manufacturers, developers and third parties to obtain gaming terminals, amusement machines, and related supplies, programs, and technologies for its business on acceptable terms” for more information.
We are dependent on relationships with key manufacturers, developers and third parties to obtain gaming terminals, amusement machines, and related supplies, programs, and technologies for our business on acceptable terms.
The supply of our gaming terminals, stand-alone ATMs, redemption devices and amusement devices depend upon the manufacture, development, assembly, design, maintenance and repair of such products by certain key providers, as well as regulatory approval for these products. Our operating results could be adversely affected by an interruption or cessation in the supply of these items, a serious quality assurance lapse, including as a result of the insolvency of any key provider, or regulatory issues related to key providers’ products or required licenses. We have achieved significant cost savings through centralized purchasing of equipment and non-equipment. However, as a result, we are exposed to the credit and other risks of having a small number of key suppliers. In addition, during 2023 and during the first half 2024, we had to accelerate certain of our capital expenditures related to gaming machine components to manage our supply chain, resulting in higher capital expenditures for the year than we had originally anticipated. While we make every effort to evaluate counterparties prior to entering into long-term and other significant procurement contracts, we cannot predict the impact on suppliers of the current economic environment and other developments in their respective businesses. Insolvency, financial difficulties, supply chain delays, regulatory issues, tariffs and trade barriers (including tariffs impacting imports from China) or other factors may result in our suppliers not being able to fulfill the terms of their agreements. Further, such factors may render suppliers unwilling to extend contracts that provide favorable terms to us or may force them to seek to renegotiate existing contracts.
Failure of key suppliers to meet their delivery commitments could result in our being in breach of and subsequently losing contracts with key location partners. Although we believe we have alternative sources of supply for the equipment and other supplies used in our business, the limited number of suppliers in the distributed gaming business could lead to delays in the delivery of products or components, and possible resultant breaches of contracts that it is party to with location partners, increases in the prices we must pay for products or components, problems with product quality or components coming to the end of their life and other concerns. We may be unable to find adequate replacements for suppliers within a reasonable time frame, on favorable commercial terms or at all.
Certain of our products and services, including a Player Rewards Program that we intend to implement, include know-your-customer programs or technologies supplied by third parties. These programs and technologies could be an important aspect of products and services because they can confirm certain information with respect to players and prospective players, such as age, identity and location. Payment processing programs and technologies, typically provided by third parties, are also a necessary feature of our products and services. In the event that these products and technologies are not made available to us on acceptable terms, or in the event that they are defective, our results of operations, cash flows and financial condition may be materially adversely affected.
Our future results of operations may be negatively impacted by slow growth in demand for gaming terminals and by the slow growth of new gaming jurisdictions.
SlowAt the same time, slow growth or declines in the demand for gaming terminals could reduce the demand for our services and negatively impact our results of operations, cash flows and financial condition. Moreover, evenEven with the expansion of gaming into new jurisdictions, the opening of new locations and the addition of new gaming terminals and amusement machines in existing locations, demand for our services couldmay decline due to the desires of location partners,partner preferences, unfavorable economic conditions, the failure to obtain regulatory approvalsapprovals, andor the availability of financing.financing Accordingly,for welocation maypartners notand befor successfulus, any of which could constrain growth, reduce returns on new deployments, and divert resources from other initiatives. Competitive pressures from other gaming and entertainment options, including online and mobile gaming, casinos and alternative leisure activities, further increase execution risk and could adversely affect our ability to capture share in placing additional gaming terminalsnew or amusementexisting machines with additional locations.markets.
We are dependent on a concentrated network of key manufacturers, developers, and third-party providers for gaming terminals, amusement machines, redemption devices, stand-alone ATMs, and related software, content, and technologies, many of which require regulatory approvals before they can be marketed or deployed. Any interruption, delay, or deterioration in supply—including from insolvency or financial distress of a key provider, serious quality control lapses, regulatory issues with a supplier or its products or licenses, tariffs and trade barriers (including those affecting imports from China), or broader supply chain dislocations—could impair our ability to procure equipment, refresh content, service existing placements, or meet contractual obligations to location partners, thereby adversely affecting our results of operations, cash flows, and financial condition. Our centralized purchasing program has delivered cost efficiencies but increases exposure to the credit and counterparty risks associated with a small number of suppliers, and during 2023 and the first half of 2024, we accelerated capital expenditures to manage component availability and supply timing, resulting in higher capital expenditures for the year than we had originally anticipated.
The gaming equipment sector has experienced significant consolidation, and a substantial portion of U.S. gaming terminals is manufactured by a small number of companies. This concentration, together with cyclical demand for components and content, can lead to price and delivery volatility and reduce our bargaining leverage. If we lose a supplier, we may be unable to replace it on acceptable terms or timelines, and remaining suppliers may increase fees and costs. Even where alternative sources exist, the limited number of qualified vendors in distributed gaming and the need for regulatory certifications can constrain substitution, resulting in longer lead times, higher prices, life-cycle and end-of-life component challenges, and product quality issues. Failure by key suppliers to meet delivery commitments or to provide compliant, timely, and competitively priced products could cause delays, trigger breaches or loss of contracts with location partners, and limit our ability to introduce new or refreshed offerings.
Further, we rely on specialized third-party technologies and services-such as know-your-customer, geolocation, identity verification, and payment processing-that are embedded in, or integral to, our products and programs, including our Player Rewards Program. If these technologies become unavailable on acceptable terms, experience outages or defects, or require re-certification that is delayed or denied, we may face service disruptions, increased operating expenses, and lost revenue opportunities. Collectively, these supply-side risks—including supplier concentration, industry consolidation, regulatory gating, limited alternative sources, and price and delivery volatility—could materially and adversely affect our operations, growth initiatives, and financial performance.
Our contracts with our location partners generally contain initial multi-year terms. While we have historically experienced high rates of contract extension or renewal, changes in applicable laws, regulations or rules, as well as other factors, may result in declines in contract extensions or renewals. These factors may include, for example, actions by regulators or licensing authorities, changes in our location partners’ business strategies, financial condition or ownership, competitive pressures, consolidation among partners, budget constraints, market or economic conditions, or other circumstances outside of our control. The termination, expiration or failure to renew one or more of our contracts with our location partners could cause us to lose substantial revenue, which could have an adverse effect on our ability to win or renew other contracts or pursue growth initiatives. In addition, we may not be able to obtain new or renewed contracts with location partners that contain terms that are as favorable as our current terms in its current contracts, and any less favorable contract terms or diminution in scope could negatively impact our business.
Our contracts with our location partners generally contain initial multi-year terms. Contracts entered into with Illinois-based location partners prior to February 2018 typically contained automatic renewal provisions that provide the individual partner with an option to terminate within a specified time frame. As a result of the Illinois Gaming Board (“IGB”) rule changes, contracts entered into after February 2018 do not contain renewal provisions, automatic or otherwise. At the end of a contract term, location partners may choose to extend their engagement by signing a new contract or may sign with a competitor terminal operator, in their sole discretion.
While we have historically experienced high rates of contract extension or renewal, these rule changes may lead to declines in contract extension or renewal. The termination, expiration or failure to renew one or more of its contracts with its location partners could cause us to lose substantial revenue, which could have an adverse effect on our ability to win or renew other contracts or pursue growth initiatives.
In addition, we may not be able to obtain new or renewed contracts with location partners that contain terms that are as favorable as our current terms in its current contracts, and any less favorable contract terms or diminution in scope could negatively impact our business.
Additionally,In addition, our revenue, business, resultresults of operations, cash flows and financial condition could be negatively affected if our location partners sell or merge themselves or their locations with other entities. Upon the sale or merger of such locations, our location partners could choose to no longer partner with us and decide to contract with our competitors.
Unfavorable economic conditions or decreased discretionary spending due to other factors such as terrorist activity or threat thereof, epidemics, pandemics or other public health issues, civil unrest or other economic or political uncertainties, may adversely affect our business, results of operations, cash flows and financial condition.
Unfavorable economic conditions, including a recession, economic slowdown, decreased liquidity in the financial markets, decreased availability of credit, interest rate volatility and labor shortages, or inflation or stagflation, could have a negative effect on our business. Unfavorable economic conditions could cause location partners to shut down or ultimately declare bankruptcy, which could adversely affect our business. Unfavorable economic conditions may also result in volatility in the credit and equity markets. For example, U.S. capital and credit markets may be adversely affected by numerous factors including: instability in the U.S. and global banking systems due to financial institutions experiencing financial distress, entering into receivership or becoming insolvent, or concerns or rumors about any events of these kinds; uncertainty with respect to the U.S. federal budget; a resumption of the war in Israel, the war between Russia and Ukraine, the possibility of a wider European or global conflict, reciprocal and increased tariffs and global sanctions imposed in response thereto. The difficulty or inability of location partners to access their funds or generate or obtain adequate levels of capital to finance their ongoing operations may cause some to close or ultimately declare bankruptcy. We cannot fully predict the effects that unfavorable social, political and economic conditions and economic uncertainties and decreased discretionary spending could have on its business.
Our revenue is largely driven by players’ disposable incomes and level of gaming activity. Unfavorable economic conditions may reduce the disposable incomes of players at location partners and may result in fewer players visiting location partners, reduced play levels, and lower amounts spent per visit, adversely affecting our results of operations and cash flows. Adverse changes in discretionary consumer spending or consumer preferences, which may result in fewer players visiting location partners and reduced frequency of visits and play levels, could also be driven by an unstable job market, outbreaks (or fear of outbreaks) of contagious diseases, inflation, stagflation, rising interest rates or other factors. Socio-political factors such as terrorist activity or threat thereof, civil unrest or other economic or political uncertainties that contribute to consumer unease may also result in decreased discretionary spending by players and have a negative effect on us.
Our revenue growth and future success depends on our ability to expand into new markets, which may not occur as anticipated or at all. In addition, we may expand into new businesses, which may subject us to additional risks.
Our future success and growth depend in large part on the successful addition of new locations as partners (whether through organic growth, such as conversions from competitors or partner relationships) and on the entry into new markets. Our ability to succeed in new markets depends in part on displacing entrenched competitors who are familiar with these markets and are known to players. In many cases, we are attempting to enter into or expand our presence in these newer markets and where the appeal and success of gaming terminals and other forms of entertainment has not yet been proven. In some cases, we may need to develop or expand its sales channels and leverage the relationships with its location partners in order to execute this strategy. There can be no assurance that gaming will have success with new location partners or in new markets, or that we will succeed in capturing a significant or even acceptable market share in any new markets. See “— We are subject to strict government regulations that are constantly evolving and may be amended, repealed, or subject to new interpretations, which may limit existing operations, have an adverse impact on the ability to grow or may expose us to fines or other penalties.” If we fail to successfully expand into these markets, we may have difficulty growing our business and may lose business to our competitors.
In addition, if we are presented with appropriate opportunities, we may expand beyond our core gaming business by acquiring other additional businesses, services, resources, or assets, including gaming parlors, casinos or hospitality/retail operations, that we believe will be accretive to our core business, which may subject us to additional risks. For example, in December 2024, we acquired Fairmount Holdings, Inc. (“Fairmount”), the owner of the FanDuel Sportsbook & Horse Racing in Collinsville, Illinois, where we will operate a racetrack and plan to develop and operate a casino.
Our business is geographically concentrated, which subjects us to greater risks from changes in local or regional conditions.
We currently install gaming terminals and amusement devices in locations primarily in Illinois, Montana and Nevada. Due to this geographic concentration, our results of operations, cash flows and financial condition are subject to greater risks from changes in local and regional conditions, such as:
Management's Discussion & Analysis (MD&A)
New heading “Loss on debt extinguishment”
New heading “New Credit Facility”
New heading “Other Financing Activities”
New heading “Interest rate caplets and collars”
Removed heading “Loss on change in fair value of contingent earnout shares”
Largest changes
“The New Credit Facility contains customary affirmative and negative covenants including limitations on our ability, the Borrower, and their restricted subsidiaries to, amongst other things, grant additional liens, incur additional indebtedness, merge or consolidate, dispose of assets, engage in certain transactions with affiliates, and make restricted payments. …”see in full comparison
“If an event of default (as such term is defined in the Credit Agreement) occurs, the lenders would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement, termination of the lenders’ commitments thereunder, foreclosure on collateral, and all other remedial actions available to a secured creditor. The failure to pay certain amounts owing under the Credit Agreement may result in an increase in the interest rate applicable thereto.”see in full comparison
“On August 4, 2020, in order to provide a waiver of financial covenant breach for the periods ended September 30, 2020 through March 31, 2021 of the First Lien Net Leverage Ratio and Fixed Charge Coverage Ratio (each as defined under the Credit Agreement), we and the other parties thereto entered into Amendment No. 1 to the Credit Agreement (“Amendment No. 1”). Amendment No.1 also raised the floor for the adjusted LIBOR rate to 0.50% and the floor for the Base Rate to 1.50%. …”see in full comparison
“The Credit Agreement contains certain customary affirmative and negative covenants and events of default and requires us and certain of our affiliates obligated under the Credit Agreement to make customary representations and warranties in connection with credit extensions thereunder.”see in full comparison
“As of December 31, 2025, we had an outstanding principal payment of $7.5 million which was supposed to be timely withdrawn by the lender on December 31, 2025. We notified the lender of this clerical error and the $7.5 million payment was drawn by the lender on January 2, 2026 and applied retroactively to ensure there was no breach of covenant. As such, we were in compliance with all debt covenants under the New Credit Facility as of December 31, 2025 and expect to remain in compliance for the next 12 months.”see in full comparison
“At the Borrower’s election, borrowings under the New Credit Facility bear interest at either (i) a base rate equal to the highest of (a) the federal funds effective rate plus 0.5%, (b) the prime rate announced by CIBC Bank USA, or (c) 1-month Term Secured Overnight Financing Rate (“Term SOFR”) plus 1% or (ii) Term SOFR for an applicable interest period, in each case plus an applicable margin. …”see in full comparison
Full comparison: every changed paragraph (106)
A discussion of our results of operations on a consolidated basis for the years ended December 31, 20242025 and 20232024 are presented below. For the discussion of our results of operations on a consolidated basis for the years ended December 31, 20232024 and 2022,2023, please see our Annual Report on Form 10-K for the year ended December 31, 20232024 that was filed on FebruaryMarch 28,3, 2024.2025.
We are a leading distributed gaming operator in the United States (“U.S.”), as well as a developer of brick-and-mortar casinos that serve local gaming markets and horse racing venues. We are a preferred partner for local business owners in the markets we serve. We offer turnkey, full-service gaming solutions to bars, restaurants, convenience stores, truck stops, and fraternal and veteran establishments across the country, as well as casinos and horse racing venues. Our focus is providing unmatched customer support, guidance, and expertise so our location partners can grow their businesses with an additional revenue stream. 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 are a leading distributed gaming and local entertainment operator in the United States (“U.S.”) and a preferred partner for local business owners in the markets we serve. We offer turnkey, full-service gaming solutions to bars, restaurants, convenience stores, truck stops, and fraternal and veteran establishments across the country. In strategic markets, we are the owner and operator of our own retail establishments, and gaming and entertainment venues.
Our operations offer a complementary source of revenue for our location partners by offering a “one-stop” solution of support, service, and equipment through:
•Providing unmatched customer support, guidance, and expertise so our location partners can grow their businesses with incremental revenue.
•Installing, maintaining, operating and servicing 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, driving game play and player loyalty.
•Offering amusement devices, including jukeboxes, dartboards, pool tables, and other entertainment related equipment that enhance customer experience and engagement.
We also design and manufacture gaming terminals and related equipment. We are continuously evaluating additional opportunities that are complementary to our core business.business, such as our acquisition of Fairmount Park - Casino & Racing (“Fairmount”) in Collinsville, Illinois.
•Montana - we were granted a manufacturer, distributor and route operator license in June 2022 by the Gambling Control Division of the Montana Department of Justice since June 2022,Justice,
•Nebraska - we became a licensed distributor of mechanical amusement devices in Nebraska in JuneMarch 2022, and commenced operations in this market,market in June 2022,
•Louisiana - we entered the Louisiana market via acquisition in November 2024 and hold a license as a device owner from the Louisiana Gaming Control Board to operate video draw poker devices.devices since November 2024.
InAs Decemberpreviously 2024mentioned, we acquired the FanDuel Sportsbook and Horse RacingFairmount in Illinois,December 2024, which serves the greater St. Louis/southern Illinois market and will expand our operations into local casino gaming and horse racing. StartingIn inApril 2025, we plan to open a casino at the FanDuel Sportsbook and Racktrack in the greater St. Louis/southern Illinois market, with Phase I of the casino opening in second quarter 2025opened and the Phase II build out of a permanent facility anticipated to start shortly after the completion of Phase I. The 2025 racing season isbegan plannedat for April - October 2025.Fairmount. The casino property and associated racetrack will generategenerates revenues and expenses from slot machines, video table games, a sports book, ancillary food and beverage services, commission on pari-mutuel wagering, racing event-related services, and other miscellaneous operations.
Ongoing interest rate uncertainty, persistent inflation, and reciprocalincreased and/or increasedreciprocal tariffs may increase the risk of an economic recession and volatility in the capital or credit markets in the U.S. and other markets globally. Our location partners may be adversely impacted by changes in overall economic and financial conditions, and certain location partners may cease operations in the event of a recession or inability to access financing. Furthermore, our revenue is largely driven by players’ disposable incomes and level of gaming activity,activity. and economicEconomic conditions that adversely impact players’ ability and desire to spend disposable income at our locationslocation partners may adversely affect our results of operations and cash flows.
ToIn date,2025, we havedid not observedobserve any material impacts into our business or outlook,outlook outsidefrom ofthe observedmacroeconomic increasesfactors innoted our costs related to higher wages and increased interest expense on our debt.above. In 2023 and the first half of 2024, we accelerated certain of our capital expenditures related to gaming machinesterminals and related components to manage our supply chain.
The One Big Beautiful Bill Act (the “Act”) was signed into law on July 4, 2025. The Act contains significant tax law changes impacting business tax payers with various effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. Among the tax law changes that impact us are those that relate to the timing of certain tax deductions including depreciation expense, interest expense and research and development expenditures. Because these tax law changes impact the timing of these deductions, they will not reduce our overall effective tax rate. However, these tax law changes have resulted in a favorable reduction to our tax expense for the year ended December 31, 2025 which was offset by an increase to deferred tax expense.
Net Revenues
ATM fees and other. ATM fees and other primarilyconsist representsof 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.
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 gamingour terminalsbusiness, and other equipment, (iii) location revenue share, which is governed by local governing bodies and location contracts, (iv) ATM and amusement commissions payable to locations, and (v) ATM and amusement fees.fees and vi) expenses from our casino and racing operations.
Cost of manufacturing goods sold. Cost of manufacturing goods sold consists of costs associated with the sale of gaming terminals and relatedsoftware as well as other ancillary equipment.
General and administrative. General and administrative expenses consist of operating expense and general and administrative expense. Operating expense includes payrollcompensation-related and related expensecosts 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 payrollcompensation-related and related expensecosts 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.
Amortization of intangible assets and route and customer acquisition costs. Route and customer acquisition costs consist of fees paid at the inception of contracts entered into with third parties and our gaming locations, which allowallows us to install and operate gaming terminals. The route and customer acquisition costs and route and customer acquisition costs payable are recorded at the net present value of the future payments using a discount rate equal to our incremental borrowing rate associated with itsour long-term debt. Route and customer acquisition costs are amortized on a straight-line basis over 18 years, which is the expected estimated life of the contract, including expected renewals.
Interest expense, net consists of interest on our current credit facility, 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 LIBOR/Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin, as defined under the terms of the credit facility, ranging from 1.75%1.5% to 2.75%2.5% depending on the first lien net leverage ratio.
Income tax expense consists mainly of taxes payable to national,federal, state and local authorities. Deferred income taxes are recognized for the tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities.
Net Revenues
Total net revenues for the year ended December 31, 20242025 were $1,231.0$1,331.0 million, an increase of $60.6$100.0 million, or 5.2%,8.1%, compared to the prior year. The increase was driven primarily by an increase in net gaming revenue of $59.2$70.7 million, or 5.3%,6.0%, which reflected an increase in gaming locationslocations, gaming terminals and terminals.revenue from our casino operations, as well as higher ATM fees and other revenue of $54.9 million, an increase of $31.2 million, or 131.7%, which included revenue from our racing operations. Total net revenues by state are presented below (in thousands, except %s):
(1) Revenues2024 revenues for Louisiana only represents two months of operations.
Total cost of revenue for the year ended December 31, 20242025 was $852.4$908.1 million, an increase of $42.8$55.7 million, or 5.3%,6.5%, compared to the prior year duedriven primarily toby higher net gaming revenue,revenue and revenue from our racing operations, as described above.
Cost of manufacturing goods sold for the year ended December 31, 20242025 was $7.1$5.6 million, a decrease of $0.6$1.5 million, or 7.4%,20.7%, compared to the prior year primarily due primarily to lower manufacturing revenue.revenue attributable to a decline in software sales.
Total general and administrative expenses for the year ended December 31, 20242025 were $194.7$219.3 million, an increase of $14.5$24.6 million, or 8.0%,12.6%, compared to the prior year. The increase was attributable to higher payroll-related costs, facilities-related expenses, and insurance-related costs as we continue to grow our operations, as well as higher stock-based compensation expense, partially offset by lower legal settlements and parts and repair expense.
Amortization of intangible assets and route and customer acquisition costs for the year ended December 31, 20242025 waswere $22.6$25.4 million, an increase of $1.4$2.8 million, or 6.4%,12.6%, compared to the prior year due to anhigher increaseamortization inexpense on location contracts acquired.
Other expenses, net for the year ended December 31, 20242025 were $19.3$11.9 million, ana increasedecrease of $12.9$7.5 million, or 199.7%,38.6%, compared to the prior year. The increasedecrease was primarily attributable to higherlower fair value adjustments associated with the revaluation of contingent consideration liabilities and higherlower non-recurring expenses related to acquisitions, as well as the impact of a $1.7 million gain recognized in the prior-year period on the convertible note settlement as discussed in Note 4 to the consolidated financial statements.expenses.
Interest expense, net for the year ended December 31, 20242025 was $35.9$34.2 million, ana increasedecrease of $2.7$1.7 million, or 8.3%,4.7%, compared to the prior year,year. primarilyWe dueexperienced to an increase in average outstanding debt and higherlower interest rates,rates partially offset byand the benefit realized on our interest rate caplets.caplets, partially offset by an increase in average outstanding debt. For the year ended December 31, 2024,2025, the weighted-average interest rate, excluding the impact of our interest rate caplets, was approximately 7.4%6.3% compared to the weighted-average interest rate of approximately 7.3%7.4% for the prior year.
Loss on change in fair value of contingent earnout shares
Loss on debt extinguishment
A loss on debt extinguishment of $1.1 million was recorded for the year ended December 31, 2025 in connection with the entry into our New Credit Facility. For more information on our New Credit Facility and the related loss on debt extinguishment, see the discussion within the Liquidity and Capital Resources later in this section.
Income tax expense for the year ended December 31, 20242025 was $18.4$20.7 million, aan decreaseincrease of $1.7$2.2 million, or 8.4%,12.0%, compared to the prior year. The effective tax rate for the year ended December 31, 20242025 was 34.3%28.7% compared to 30.6%34.3% 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 was the primary driver for the fluctuations in the tax rate year over year.
The number of locations is based on a combination of third-party portal data and data from our internal systems. We utilize this metric to continually monitor growth from existing locations, organic openings, purchased locations, and competitor conversions. Competitor conversions occur when a location chooses to change terminal operators.
Adjusted EBITDA andis Adjusted net income area non-GAAP financial measures,measure, but areis a key metricsmetric management uses to monitor ongoing core operations. Adjusted EBITDA and Adjusted net income excludeexcludes the effects of certain non-cash items or represent certain nonrecurring items that are unrelated to core performance. Management believes thesethis non-GAAP financial measuresmeasure enhanceenhances the understanding of our underlying drivers of profitability,profitability and trends in our business,business and facilitatefacilitates company-to-company and period-to-period comparisons. Management also believes that thesethis non-GAAP financial measuresmeasure areis used by investors, analysts and other interested parties as measuresa measure of financial performance and to evaluate our ability to fund capital expenditures, service debt obligations and meet working capital requirements.
Adjusted net income is defined as net income plus:
•Amortization of intangible assets and route and customer acquisition costs
•Stock-based compensation expense
•Loss from unconsolidated affiliates
•Loss on change in fair value of contingent earnout shares
•Gain on expiration of warrants
•Other expenses, net which consists of (i) non-cash expenses including the remeasurement of contingent consideration liabilities, (ii) non-recurring lobbying and legal expenses related to distributed gaming expansion in current or prospective markets, and (iii) other non-recurring expenses
•Tax effect of adjustments
•Other expenses, net which consists of i) non-cash expenses including the remeasurement of contingent consideration liabilities, ii) non-recurring lobbying and legal expenses related to distributed gaming expansion in current or prospective markets, and iii) other non-recurring expenses
•Other expenses, net
•Tax effect of adjustments
•Emerging markets which reflects the results, on an Adjusted EBITDA basis, for non-core jurisdictions where our operations are developing ◦Markets are no longer considered emerging when we have installed or acquired at least 500 gaming terminals in the jurisdiction, or when 24 months have elapsed from the date we first install or acquire gaming terminals in the jurisdiction, whichever occurs first ◦We currently view Pennsylvania as an emerging market ◦Prior to January 2024, Iowa was considered an emerging market ◦Prior to April 2023, Nebraska was considered an emerging marketfirst.
◦Prior to June 2025, Pennsylvania was considered an emerging market.
◦Prior to January 2024, Iowa was considered an emerging market.
◦As of June 2025, we no longer have any emerging markets.
•Loss on debt extinguishment
Adjusted net income and Adjusted EBITDA
Adjusted EBITDA for the year ended December 31, 20242025 was $189.1$210.1 million, an increase of $7.7$21.0 million, or 4.2%,11.1%, compared to the prior year. The increase in performance was attributable to an increase in the number of locations and gaming terminals.
We believe that our cash and cash equivalents, cash flows from operations and borrowing availability under our seniorNew securedCredit credit facilityFacility will be sufficient to meet our capital requirements for the next twelve months.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 the Board approved share repurchase program and near termnear-term acquisitions. As of December 31, 2024,2025, we had $281.3$296.6 million in cash and cash equivalents.
Senior SecuredPrior Credit Facility
On November 13, 2019, we entered into a credit agreement (as amended, the “Prior Credit AgreementFacility”) as borrower, with our wholly-owned domestic subsidiaries, as guarantors, the banks, financial institutions and other lending institutions from time to time party thereto, as lenders, the other parties from time to time party thereto and Capital One, National Association, as administrative agent (in such capacity, the “Agent”), collateral agent, issuing bank and swingline lender, providing for a:lender.
The Prior Credit Facility provided for a:
What changed in the latest 10-Q
Risk Factors
An investment in our Class A-1 common stock involves a high degree of risk. You should carefully consider the risk factors described under Part I - Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 and our condensed consolidated financial statements and related notes contained in this Quarterly Report on Form 10-Q in analyzing an investment in our Class A-1 common stock. If any such risks occur, our business, financial condition, and results of operations would likely suffer, the trading price of our Class A-1 common stock would decline, and you could lose all or part of your investment. In addition, the risk factors and uncertainties could cause our actual results to differ materially from those projected in our forward-looking statements, whether made in this report or other documents we file with the SEC, or our annual report to stockholders, future press releases, or orally, whether in presentations, responses to questions, or otherwise. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially adversely affect our business, financial condition, or results of operations.
There have been no material changes in the risk factors described in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
New heading “Loss on change in fair value of contingent earnout shares”
New heading “Cost of revenue”
New heading “Cost of manufacturing goods sold”
New heading “General and administrative”
New heading “Depreciation and amortization of property and equipment”
New heading “Amortization of intangible assets and route and customer acquisition costs”
New heading “Other expenses, net”
New heading “Interest expense, net”
New heading “Loss on change in fair value of contingent earnout shares”
New heading “Income tax expense”
Largest changes
“Amortization of intangible assets and route and customer acquisition costs”see in full comparison
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Ongoing interest rate uncertainty, persistent inflation, economic impacts from the conflict in Iran, and increased and/or reciprocal tariffs may increase the risk of an economic recession and volatility in the capital or credit markets in the U.S. and other markets globally. Our location partners may be adversely impacted by changes in overall economic and financial conditions, and certain location partners may cease operations in the event of a recession or inability to access financing. Furthermore, our revenue is largely driven by players’ disposable incomes and level of gaming activity. Economic conditions that adversely impact players’ ability and desire to spend disposable income at our location partners may adversely affect our results of operations and cash flows. For the first three monthshalf of 2026, we have not observed any material impacts to our business or outlook from the macroeconomic factors noted above.
The One Big Beautiful Bill Act (the “Act”) was signed into law on July 4, 2025. The Act contains significant tax law changes impacting business tax payerstaxpayers with various effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. Among the tax law changes that impact us are those that relate to the timing of certain tax deductions including depreciation expense, interest expense and research and development expenditures. Because these tax law changes impact the timing of these deductions, they will not reduce our overall effective tax rate. However, these tax law changes have resulted in a favorable reduction to our current tax expense for the three and six months ended MarchJune 31,30, 2026, which was offset by an increase to deferred tax expense.
The following table summarizes our results of operations on a consolidated basis for the three months ended MarchJune 31,30, 2026 and 2025:
Total net revenues for the three months ended MarchJune 31,30, 2026 were $351.6$368.1 million, an increase of $27.6$32.2 million, or 8.5%,9.6%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $29.5$33.5 million, which reflected an increase in gaming locations, terminals and revenue from our casino operations, partially offset by a decrease in manufacturing revenue of $2.6$1.2 million, or 67.9%,67.8%, due to lower equipment (timing) and software sales. Net revenues by state are presented below:
Cost of revenue for the three months ended MarchJune 31,30, 2026 was $241.6$252.6 million, an increase of $20.1$22.9 million, or 9.1%,10.0%, compared to the prior-year period, driven by higher net gaming revenue and revenue from our casino operations, as described above.
Cost of manufacturing goods sold for the three months ended MarchJune 31,30, 2026 was $0.6$0.3 million, a decrease of $1.4$0.6 million, or 69.4%,69.8%, compared to the prior-year period due to the previously mentioned decrease in equipment and software sales.
General and administrative expenses for the three months ended MarchJune 31,30, 2026 were $58.0$59.6 million, an increase of $5.0$4.7 million, or 9.5%,8.5%, compared to the prior-year period. The increase was primarily attributable to higher compensation-related costs, as we continue to grow our operations.operations, as well as higher professional fees and advertising costs.
Depreciation and amortization of property and equipment for the three months ended MarchJune 31,30, 2026 was $13.9$13.8 million, an increase of $1.6$0.7 million, or 12.7%,5.6%, compared to the prior-year period due to an increased number of gaming terminals.
Amortization of intangible assets and route and customer acquisition costs for the three months ended MarchJune 31,30, 2026 were $6.8 million, an increase of $0.5 million, or 7.9%, compared to the prior-year period was primarily due to higheran amortizationincrease expense onin route and customer acquisition costs.
Other expenses, net for the three months ended MarchJune 31,30, 2026 were $3.5$3.0 million, a increasedecrease of $0.7$1.1 million, or 25.2%,27.3%, compared to the prior-year period. The increasedecrease was primarily attributable to higherlower fair value adjustments associated with the revaluation of contingent consideration liabilities and lower non-recurring expenses, partially offset by losses on sales of assets, partially offset by lower non-recurring expenses, and lower non-recurring lobbying and legal expenses related to new markets.assets.
Interest expense, net for the three months ended MarchJune 31,30, 2026 was $8.5$8.6 million, which was a decrease of $0.2$0.1 million, or 2.1%,1.5%, compared to the prior-year period. We experienced lower interest rates, partially offset by athe lowerabsence of the prior year benefit realized on our interest rate caplets and an increase in average outstanding debt. For the three months ended MarchJune 31,30, 2026, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 5.5% compared to 6.5% in the prior-year period.
Loss on change in fair value of contingent earnout shares
The change in the fair value of contingent earnout shares for the three months ended MarchJune 31,30, 2026 was a gainloss of $1.5$5.0 million, compared to a gainloss of $2.4$5.7 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.
Income tax expense for the three months ended MarchJune 31,30, 2026 was $5.4$5.9 million, an increase of $0.4$0.8 million, or 7.7%,15.4%, compared to the prior-year period. The effective tax rate for the three months ended MarchJune 31,30, 2026 was 26.8%31.9% compared to 25.5%41.2% 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 permanent, non-taxable item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.
The following table summarizes our results of operations on a consolidated basis for the six months ended June 30, 2026 and 2025:
Net revenues
Total net revenues for the six months ended June 30, 2026 were $719.7 million, an increase of $59.9 million, or 9.1%, compared to the prior-year period. This increase was primarily driven by higher net gaming revenue of $62.9 million, which reflected an increase in gaming locations, terminals and revenue from our casino operations, partially offset by a decrease in manufacturing revenue of $3.8 million, or 67.8%, due to lower equipment and software sales. Net revenues by state are presented below:
Cost of revenue
Cost of revenue for the six months ended June 30, 2026 was $494.2 million, an increase of $43.0 million, or 9.5%, compared to the prior-year period, driven by higher net gaming revenue as described above.
Cost of manufacturing goods sold
Cost of manufacturing goods sold for the six months ended June 30, 2026 was $0.9 million, a decrease of $2.1 million, or 69.5%, compared to the prior-year period due to the previously mentioned decrease in equipment and software sales.
General and administrative
General and administrative expenses for the six months ended June 30, 2026 were $117.6 million, an increase of $9.7 million, or 9.0%, compared to the prior-year period. The increase was attributable to higher compensation-related costs, as we continue to grow our operations, as well as higher professional fees and advertising costs.
Depreciation and amortization of property and equipment
Depreciation and amortization of property and equipment for the six months ended June 30, 2026 was $27.7 million, an increase of $2.3 million, or 9.0%, compared to the prior-year period due to an increased number of gaming terminals.
Amortization of intangible assets and route and customer acquisition costs
Amortization of intangible assets and route and customer acquisition costs for the six months ended June 30, 2026 were $13.6 million, an increase of $1.0 million, or 7.9%, compared to the prior-year period was primarily due to an increase in route and customer acquisition costs.
Other expenses, net
Other expenses, net for the six months ended June 30, 2026 were $6.5 million, a decrease of $0.4 million, or 5.9%, compared to the prior-year period. The decrease was primarily attributable to lower non-recurring expenses, lower fair value adjustments associated with the revaluation of contingent consideration liabilities and lower lobbying and legal expenses related to new markets, partially offset by losses on sales of assets.
Interest expense, net
Interest expense, net for the six months ended June 30, 2026 was $17.1 million, a decrease of $0.3 million, or 1.8%, compared to the prior-year period. We experienced lower interest rates, partially offset by a lower benefit realized on our interest rate caplets and an increase in average outstanding debt. For the six months ended June 30, 2026, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 5.5% compared to a rate of approximately 6.5% for the prior-year period.
Loss on change in fair value of contingent earnout shares
The change in the fair value of contingent earnout shares for the six months ended June 30, 2026 was a loss of $3.5 million, compared to a loss of $3.4 million in 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.
Income tax expense
Income tax expense for the six months ended June 30, 2026 was $11.2 million, an increase of $1.2 million, or 11.6%, compared to the prior-year period. The effective tax rate for the six months ended June 30, 2026 was 29.3% compared to 31.6% 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.
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:
•Loss from unconsolidated affiliates
•GainLoss on change in fair value of contingent earnout shares
•All other adjustments include:
•◦Other expenses, net which consists of i) non-cash expenses including the remeasurement of contingent consideration liabilities, ii) non-recurring lobbying and legal expenses related to distributed gaming expansion in current or prospective markets, iii) other non-recurring expenses, and beginning in 2026 iv) gain or loss on sale of fixed assets, which were previously presented in general and administrative expenses. Prior periods have not been recast to reflect this change.
◦Loss from unconsolidated affiliates
•◦Emerging markets which reflects the results, on an Adjusted EBITDA basis, for non-core jurisdictions where our operations are developing ◦Markets are no longer considered emerging when we have installed or acquired at least 500 gaming terminals in the jurisdiction, or when 24 months have elapsed from the date we first install or acquire gaming terminals in the jurisdiction, whichever occurs first.
•Markets are no longer considered emerging when we have installed or acquired at least 500 gaming terminals in the jurisdiction, or when 24 months have elapsed from the date we first install or acquire gaming terminals in the jurisdiction, whichever occurs first.
◦•Prior to June 2025, Pennsylvania was considered an emerging market.
◦•As of June 2025, we no longer have any emerging markets.
(1)Loss on sale of fixed assets was $0.7$2.5 million and $3.2 million for the three and six months ended MarchJune 31,30, 20262026, respectively, and is included in Other expenses, net. Loss on sale of fixed assets was $0.1 million and $0.3 million for the three and six months ended MarchJune 31,30, 20252025, respectively, and is presented in general and administrative expenses, which is not an adjustment for EBITDA. Also includes approximately $0.1 million for both the loss contributed from unconsolidated affiliates and emerging markets for the three and six months ended June 30, 2026, and 2025.
Adjusted EBITDA for the three months ended MarchJune 31,30, 2026, was $53.8$58.9 million, an increase of $4.2$5.7 million, or 8.6%,10.8%, compared to the prior-year period. Adjusted EBITDA for the six months ended June 30, 2026, was $112.7 million, an increase of $10.0 million, or 9.7%, compared to the prior-year period. The increase for both periods was attributable to an increase in the number of locations and gaming terminals.
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 MarchJune 31,30, 2026, we had $274.1$255.5 million in cash and cash equivalents.
As of MarchJune 31,30, 2026, the weighted-average interest rate on our borrowings under the Credit Agreement was approximately 5.5%.
We were in compliance with all debt covenants under the Credit Agreement as of MarchJune 31,30, 2026 and expect to remain in compliance for the next 12 months.
From time to time, we may take advantage of favorable financing terms offered by vendors for purchases of property and equipment. Financed property and equipment totaled $4.5$4.2 million and $4.8 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively, of which $1.7 million is recorded in accounts payable and other accrued expenses for both periods with the remaining $2.8$2.5 million and $3.1 million recorded in other long-term liabilities on the condensed consolidated balance sheets foras theof yearsJune ended March 31,30, 2026, and December 31, 2025, respectively.
We recognized an unrealized loss,gain, net of taxes, on the change in fair value of the interest rate hedging instruments of less than $0.1$2.2 million both for the three and six months ended MarchJune 31,30, 2026. In comparison, we recognized an unrealized loss, net of taxes, of $1.1$0.8 million and $2.0 million for the three monthsand ended March 31, 2025. We also recognized interest income on the caplets of $0.4 million for the threesix months ended MarchJune 31,30, 2026.2025, In comparison, we recognized interest income on the caplets of $1.8 million for the three months ended March 31, 2025. These amounts are reflected in interest expense, net in the condensed consolidated statements of operations and other comprehensive income. As of March 31, 2026 there has been no realized gain or loss on the interest rate collar.respectively.
We recognized interest income on the caplets of $0.4 million for the six months ended June 30, 2026, as the caplets expired in January of 2026. In comparison, we recognized interest income on the caplets of $1.8 million and $3.6 million for the three and six months ended June 30, 2025, respectively. These amounts are reflected in interest expense, net in the condensed consolidated statements of operations and other comprehensive income.
As of June 30, 2026 there has been no realized gain or loss on the interest rate collar.
On May 1, 2026, we purchased $18.2 million of 2025 production tax credits for a total cost of $16.9 million. We will use the purchased tax credits on our 2025 federal tax return.return to the extent allowable. Any excess credits that arewere not usedutilized on the 2025 federal tax return will bewere carried back to tax years 2022-2024 and will be fully utilized.
For the threesix months ended MarchJune 31,30, 2026, net cash provided by operating activities was $42.7$62.7 million, a decrease in cash provided of $2.0$1.9 million compared to the prior-year period due primarily to favorable changes inunfavorable working capital adjustments forlargely accountsdue payableto andan accruedincrease expenses,in income tax receivables due to the previously mentioned purchase of production tax credits, partially offset by unfavorableincreases changesin relatedoperating income attributable to incomehigher taxes.revenues.
For the threesix months ended MarchJune 31,30, 2026, net cash used in investing activities was $23.1$47.2 million, a decrease in cash used of $3.1$12.8 million compared to the prior-year period. The decrease in cash used was primarily attributable to less cash used for the purchase of property, plant and equipment.equipment, and the absence of cash paid for an operating license in the prior year period, partially offset by increased cash used for business acquisitions. We anticipate our capital expenditures will be approximately $60-70 million in 2026.
For the threesix months ended MarchJune 31,30, 2026, net cash used in financing activities was $42.1$56.6 million, an increase in cash used of $14.2$35.3 million compared to the prior-year period. The increase is primarily attributable to higher paymentsnet repayments on debt and higher repurchases of our Class A-1 common stock.debt.
ACEL insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 50,000 shares, about $577.5K) and open-market sales in 7 filings (5 insiders, 8 trade dates, 184,313 shares, about $2.2M; 4 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -134,313 (purchases minus sales); net value about -$1.6M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-17 | Rubenstein Andrew H. |
Gift | 1,000 | — | — |
| 2026-09-15 | Kozlik Christen |
Option exercise | 1,875 | — | — |
| 2026-09-15 | Kozlik Christen |
Open-market sale | 550 | $11.55 | $6.4K |
| 2026-09-15 | Rubenstein Andrew H. |
Gift | 230 | — | — |
| 2026-09-14 | Harmer Derek |
Open-market sale | 13,162 | $11.60 | $152.7K |
| 2026-09-11 | Harmer Derek |
Open-market sale | 26,324 | $11.63 | $306.1K |
| 2026-08-07 | Rubenstein Andrew H. |
Shares withheld for tax | 151,219 | $12.16 | $1.8M |
| 2026-08-07 | Rubenstein Andrew H. |
Option exercise | 346,831 | — | — |
| 2026-08-05 | Rubenstein Andrew H. |
Open-market sale |
15,000 | $12.64 | $189.6K |
| 2026-07-15 | Harmer Derek |
Option exercise | 13,333 | — | — |
| 2026-07-15 | Harmer Derek |
Shares withheld for tax | 3,907 | $12.31 | $48.1K |
| 2026-06-15 | Kozlik Christen |
Shares withheld for tax | 550 | $13.13 | $7.2K |
| 2026-06-15 | Kozlik Christen |
Option exercise | 1,875 | — | — |
| 2026-06-15 | Harmer Derek |
Open-market sale |
20,000 | $13.00 | $260.0K |
| 2026-06-15 | Phelan Mark T. |
Open-market sale |
25,000 | $13.00 | $325.0K |
| 2026-06-10 | Rubenstein Andrew H. |
Gift | 1,500 | — | — |
| 2026-06-04 | Rubenstein Andrew H. |
Gift | 1,500 | — | — |
| 2026-06-01 | Rubenstein Andrew H. |
Open-market sale |
25,000 | $12.09 | $302.2K |
| 2026-05-29 | Rubenstein Andrew H. |
Gift |
2,225 | — | — |
| 2026-05-27 | Rubenstein Andrew H. |
Gift | 4,200 | — | — |
| 2026-05-26 | Rubenstein Andrew H. |
Gift | 4,000 | — | — |
| 2026-05-15 | Kozlik Christen |
Shares withheld for tax | 1,437 | $11.61 | $16.7K |
| 2026-05-15 | Kozlik Christen |
Option exercise | 4,902 | — | — |
| 2026-05-11 | Wardinski Bruce D |
Open-market purchase | 50,000 | $11.55 | $577.5K |
| 2026-05-08 | Rubenstein Gordon |
Open-market sale | 4,946 | $11.55 | $57.1K |
| 2026-05-08 | Rubenstein Gordon |
Gift | 9,000 | — | — |
| 2026-05-08 | Rubenstein Gordon |
Open-market sale | 7,985 | $11.55 | $92.2K |
| 2026-05-07 | Rubenstein Gordon |
Open-market sale | 17,728 | $11.34 | $201.0K |
| 2026-05-07 | Rubenstein Gordon |
Open-market sale | 28,618 | $11.34 | $324.5K |
Well-known investors holding ACEL (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 712,105 | $9.0M | 0.01% | Reduced 4% |
| D. E. Shaw & Co. | 2026-06-30 | 377,387 | $4.8M | 0.0% | Added 78% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 177,213 | $2.2M | 0.0% | Reduced 1% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 143,276 | $1.8M | 0.0% | Reduced 48% |
| Two Sigma Investments | 2026-06-30 | 88,398 | $1.1M | 0.0% | Reduced 52% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 24,235 | $305.6K | 0.0% | Reduced 79% |
| Millennium Management (Israel Englander) | 2026-06-30 | 20,132 | $253.9K | 0.0% | Reduced 58% |