Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 02, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Annual Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 001-38136 | |
Entity Registrant Name | Accel Entertainment, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 98-1350261 | |
Entity Address, Address Line One | 140 Tower Drive | |
Entity Address, City or Town | Burr Ridge, | |
Entity Address, State or Province | IL | |
Entity Address, Postal Zip Code | 60527 | |
City Area Code | 630 | |
Local Phone Number | 972-2235 | |
Title of 12(b) Security | Class A-1 Common Stock, par value $.0001 per share | |
Trading Symbol | ACEL | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001698991 | |
Entity Common Stock, Shares Outstanding | 93,280,747 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||
Net revenues | $ 136,332 | $ 101,294 | $ 241,939 | $ 302,986 | |
Operating expenses: | |||||
Video gaming expenses | 91,792 | 65,707 | 161,795 | 193,410 | |
General and administrative | 23,164 | 17,560 | 55,061 | 51,160 | |
Depreciation and amortization of property and equipment | 5,361 | 6,524 | 15,299 | 18,665 | |
Amortization of route and customer acquisition costs and location contracts acquired | 5,648 | 4,285 | 16,778 | 13,212 | |
Other expenses, net | 1,383 | 6,200 | 5,719 | 7,546 | |
Total operating expenses | 127,348 | 100,276 | 254,652 | 283,993 | |
Operating income | 8,984 | 1,018 | (12,713) | 18,993 | |
Interest expense | 3,434 | 3,315 | 10,172 | 9,518 | |
(Loss) income before income tax expense | 5,550 | (2,297) | (22,885) | 9,475 | |
Income tax expense | (6,593) | (699) | (11,788) | 2,750 | |
Net (loss) income | $ 12,143 | $ (1,598) | $ (11,097) | $ 6,725 | |
Net (loss) income per common share: | |||||
Net (loss) income per common share - basic (in usd per share) | [1] | $ 0.15 | $ (0.03) | $ (0.14) | $ 0.11 |
Net (loss) income per common share - diluted (in usd per share) | [1] | $ 0.14 | $ (0.03) | $ (0.14) | $ 0.11 |
Weighted average number of shares outstanding: | |||||
Weighted average number of shares outstanding - basic (in shares) | [1] | 82,785 | 59,684 | 79,708 | 58,500 |
Weighted average number of shares outstanding - diluted (in shares) | [1] | 86,960 | 59,684 | 79,708 | 62,013 |
Net video gaming | |||||
Net revenues | $ 129,635 | $ 98,071 | $ 231,210 | $ 293,240 | |
Amusement | |||||
Net revenues | 4,171 | 1,302 | 6,123 | 4,088 | |
ATM fees and other revenue | |||||
Net revenues | $ 2,526 | $ 1,921 | $ 4,606 | $ 5,658 | |
[1] | Per share and share amounts for 2019 have been retroactively restated to give effect to the reverse recapitalization that is discussed in Note 1. |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 179,108 | $ 125,403 |
Prepaid expenses | 3,780 | 4,151 |
Income taxes receivable | 3,907 | 3,907 |
Investment in convertible notes (current) | 14,000 | 11,000 |
Other current assets | 8,947 | 7,034 |
Total current assets | 209,742 | 151,495 |
Property and equipment, net | 130,656 | 119,201 |
Other assets: | ||
Route and customer acquisition costs, net | 16,118 | 17,399 |
Location contracts acquired, net | 155,532 | 166,783 |
Goodwill | 34,511 | 34,511 |
Investment in convertible notes, less current portion | 16,000 | 19,000 |
Other assets | 2,054 | 928 |
Total other assets | 224,215 | 238,621 |
Total assets | 564,613 | 509,317 |
Current liabilities: | ||
Current maturities of debt | 18,250 | 15,000 |
Current portion of route and customer acquisition costs payable | 1,646 | 1,700 |
Accrued location gaming expense | 1,593 | 1,323 |
Accrued state gaming expense | 7,524 | 7,119 |
Accounts payable and other accrued expenses | 20,270 | 19,511 |
Current portion of consideration payable | 3,346 | 10,293 |
Total current liabilities | 52,629 | 54,946 |
Long-term liabilities: | ||
Debt, net of current maturities | 330,757 | 334,692 |
Route and customer acquisition costs payable, less current portion | 4,201 | 4,752 |
Consideration payable, less current portion | 17,871 | 16,426 |
Deferred income tax liability | 1,188 | 12,976 |
Total long-term liabilities | 354,017 | 368,846 |
Stockholders’ equity: | ||
Preferred Stock, par value of $0.0001; 1,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019 | 0 | 0 |
Additional paid-in capital | 189,524 | 105,986 |
Accumulated deficit | (31,567) | (20,470) |
Total stockholders' equity | 157,967 | 85,525 |
Total liabilities and equity | 564,613 | 509,317 |
Class A-1 Common Stock | ||
Stockholders’ equity: | ||
Common stock issued | 9 | 8 |
Class A-2 Common Stock | ||
Stockholders’ equity: | ||
Common stock issued | $ 1 | $ 1 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Preferred stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, issued (in shares) | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.0001 | |
Class A-1 Common Stock | ||
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 |
Common stock, shares issued (in shares) | 92,146,013 | 76,637,470 |
Common stock, shares outstanding (in shares) | 92,146,013 | 76,637,470 |
Class A-2 Common Stock | ||
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, shares issued (in shares) | 3,403,363 | 4,999,999 |
Common stock, shares outstanding (in shares) | 3,403,363 | 4,999,999 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY - USD ($) $ in Thousands | Total | Common Stock | Common StockClass A-1 Common Stock | Common StockClass A-2 Common Stock | Additional Paid-In Capital | Treasury Stock | Accumulated Deficit | ||||
Beginning balance (in shares) at Dec. 31, 2018 | [1] | 58,491,281 | 1,311,880 | ||||||||
Beginning balance at Dec. 31, 2018 | $ 57,118 | $ 6 | [1] | $ 80,146 | [1] | $ (5,832) | [1] | $ (17,202) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Exercise of warrants (in shares) | [1] | 495,030 | 46,409 | ||||||||
Exercise of warrants | 561 | 334 | [1] | $ 227 | [1] | ||||||
Employee stock option compensation | 128 | 128 | [1] | ||||||||
Net (loss) income | 3,995 | 3,995 | |||||||||
Ending balance (in shares) at Mar. 31, 2019 | [1] | 58,986,311 | 1,265,471 | ||||||||
Ending balance at Mar. 31, 2019 | 61,802 | $ 6 | [1] | 80,608 | [1] | $ (5,605) | [1] | (13,207) | |||
Beginning balance (in shares) at Dec. 31, 2018 | [1] | 58,491,281 | 1,311,880 | ||||||||
Beginning balance at Dec. 31, 2018 | 57,118 | $ 6 | [1] | 80,146 | [1] | $ (5,832) | [1] | (17,202) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net (loss) income | 6,725 | ||||||||||
Ending balance (in shares) at Sep. 30, 2019 | [1] | 61,449,857 | 980,863 | ||||||||
Ending balance at Sep. 30, 2019 | 70,313 | $ 6 | [1] | 86,305 | [1] | $ (5,521) | [1] | (10,477) | |||
Beginning balance (in shares) at Mar. 31, 2019 | [1] | 58,986,311 | 1,265,471 | ||||||||
Beginning balance at Mar. 31, 2019 | 61,802 | $ 6 | [1] | 80,608 | [1] | $ (5,605) | [1] | (13,207) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Exercise of common stock options (in shares) | [1] | 284,608 | |||||||||
Exercise of common stock options | 84 | $ 84 | [1] | ||||||||
Exercise of warrants (in shares) | [1] | 1,164,093 | |||||||||
Exercise of warrants | 1,205 | 1,205 | [1] | ||||||||
Employee stock option compensation | 128 | 128 | [1] | ||||||||
Net (loss) income | 4,328 | 4,328 | |||||||||
Ending balance (in shares) at Jun. 30, 2019 | [1] | 60,150,404 | 980,863 | ||||||||
Ending balance at Jun. 30, 2019 | 67,547 | $ 6 | [1] | 81,941 | [1] | $ (5,521) | [1] | (8,879) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Contributed capital, professional service fees paid by shareholder | 2,891 | 2,891 | [1] | ||||||||
Exercise of warrants (in shares) | [1] | 1,299,453 | |||||||||
Exercise of warrants | 1,346 | 1,346 | [1] | ||||||||
Employee stock option compensation | 127 | 127 | [1] | ||||||||
Net (loss) income | (1,598) | (1,598) | |||||||||
Ending balance (in shares) at Sep. 30, 2019 | [1] | 61,449,857 | 980,863 | ||||||||
Ending balance at Sep. 30, 2019 | 70,313 | $ 6 | [1] | 86,305 | [1] | $ (5,521) | [1] | (10,477) | |||
Beginning balance (in shares) at Dec. 31, 2019 | 76,637,470 | 4,999,999 | |||||||||
Beginning balance at Dec. 31, 2019 | 85,525 | $ 8 | $ 1 | 105,986 | (20,470) | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Conversion of A-2 common stock to A-1 common stock (in shares) | 1,596,636 | 1,596,636 | |||||||||
Employee stock option compensation | 1,060 | 1,060 | |||||||||
Net (loss) income | (1,966) | (1,966) | |||||||||
Ending balance (in shares) at Mar. 31, 2020 | 78,234,106 | 3,403,363 | |||||||||
Ending balance at Mar. 31, 2020 | 84,619 | $ 8 | $ 1 | 107,046 | (22,436) | ||||||
Beginning balance (in shares) at Dec. 31, 2019 | 76,637,470 | 4,999,999 | |||||||||
Beginning balance at Dec. 31, 2019 | 85,525 | $ 8 | $ 1 | 105,986 | (20,470) | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Net (loss) income | (11,097) | ||||||||||
Ending balance (in shares) at Sep. 30, 2020 | 92,146,013 | 3,403,363 | |||||||||
Ending balance at Sep. 30, 2020 | 157,967 | $ 9 | $ 1 | 189,524 | (31,567) | ||||||
Beginning balance (in shares) at Mar. 31, 2020 | 78,234,106 | 3,403,363 | |||||||||
Beginning balance at Mar. 31, 2020 | 84,619 | $ 8 | $ 1 | 107,046 | (22,436) | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Exercise of common stock options (in shares) | 148,299 | ||||||||||
Exercise of common stock options | 359 | 359 | |||||||||
Employee stock option compensation | 1,327 | 1,327 | |||||||||
Net (loss) income | (21,274) | (21,274) | |||||||||
Ending balance (in shares) at Jun. 30, 2020 | 78,382,405 | 3,403,363 | |||||||||
Ending balance at Jun. 30, 2020 | 65,031 | $ 8 | $ 1 | 108,732 | (43,710) | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||
Exercise of common stock options (in shares) | 181,208 | ||||||||||
Exercise of common stock options | 405 | 405 | |||||||||
Exercise of warrants (in shares) | 5,582,400 | ||||||||||
Exercise of warrants | 5 | 5 | |||||||||
Employee stock option compensation | 1,668 | 1,668 | |||||||||
Issuance of common stock (in shares) | 8,000,000 | ||||||||||
Issuance of common stock, net | 78,715 | $ 1 | 78,714 | ||||||||
Net (loss) income | 12,143 | 12,143 | |||||||||
Ending balance (in shares) at Sep. 30, 2020 | 92,146,013 | 3,403,363 | |||||||||
Ending balance at Sep. 30, 2020 | $ 157,967 | $ 9 | $ 1 | $ 189,524 | $ (31,567) | ||||||
[1] | Share amounts for 2019 have been retroactively restated to give effect to the reverse capitalization that is discussed in Note 1. |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (11,097) | $ 6,725 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation and amortization of property and equipment | 15,299 | 18,665 |
Amortization of route and customer acquisition costs and location contracts acquired | 16,778 | 13,212 |
Amortization of debt issuance costs | 1,414 | 436 |
Contributed capital, professional service fees paid by shareholder | 0 | 2,891 |
Stock-based compensation | 4,055 | 383 |
Loss on disposal of property and equipment | 95 | 111 |
Net loss on write-off of route and customer acquisition costs and route and customer acquisition costs payable | 446 | 187 |
Remeasurement of contingent consideration | (2,233) | (86) |
Payments on consideration payable | (1,961) | 0 |
Accretion of interest on route and customer acquisition costs payable, contingent consideration, and contingent stock consideration | 1,543 | 1,279 |
Deferred income taxes | (11,788) | 2,750 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | (1,502) | (2,643) |
Income taxes receivable | 0 | (4,517) |
Route and customer acquisition costs | (539) | (2,444) |
Route and customer acquisition costs payable | (604) | (1,031) |
Accounts payable and accrued expenses | (5,662) | 9,800 |
Other assets | (126) | (66) |
Net cash provided by operating activities | 4,118 | 45,652 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (17,656) | (19,878) |
Proceeds from the sale of property and equipment | 119 | 24 |
Payments for location contracts acquired | 0 | (509) |
Purchase of investment in convertible note | 0 | (5,000) |
Business and asset acquisitions, net of cash acquired | (5,611) | (100,896) |
Net cash used in investing activities | (23,148) | (126,259) |
Cash flows from financing activities: | ||
Payments on term loan | (9,000) | (9,375) |
Proceeds from delayed draw term loans | 65,000 | 112,250 |
Payments on delayed draw term loans | (3,875) | (9,250) |
Net payments on line of credit | (53,500) | 6,000 |
Payments for debt issuance costs | (723) | (600) |
Proceeds from issuance of common stock, net | 78,714 | 0 |
Proceeds from exercise of stock options and warrants | 769 | 3,196 |
Payments on consideration payable | (4,650) | (2,091) |
Payments on capital lease obligation | 0 | (531) |
Net cash provided by financing activities | 72,735 | 99,599 |
Net increase in cash and cash equivalents | 53,705 | 18,992 |
Cash and cash equivalents: | ||
Beginning of period | 125,403 | 92,229 |
End of period | 179,108 | 111,221 |
Supplemental disclosures of cash flow information: | ||
Interest, net of amount of capitalized | 9,803 | 8,146 |
Income taxes | 0 | 1,759 |
Supplemental schedules of noncash investing and financing activities: | ||
Purchases of property and equipment in accounts payable and accrued liabilities | 7,097 | 4,917 |
Common stock offering costs in accounts payable and accrued liabilities | 1,476 | 0 |
Acquisition of businesses and assets: | ||
Total identifiable net assets acquired | 7,563 | 119,138 |
Less cash acquired | (212) | (8,861) |
Less consideration payable | (1,740) | (9,381) |
Cash purchase price | $ 5,611 | $ 100,896 |
Description of Business
Description of Business | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of Business Accel Entertainment, Inc.'s (and together with its subsidiaries, the “ Company ”) wholly owned subsidiary, Accel Entertainment Gaming LLC, is a terminal operator licensed by the State of Illinois Gaming Board since March 15, 2012. Its terminal operator license allows the Company to install and operate video gaming terminals in licensed video gaming locations throughout the State of Illinois as approved by individual municipalities. The Company also operates redemption terminals, which also function as automated teller machines (“ATMs”) at its licensed video gaming locations, and amusement equipment at certain locations. The Company is subject to various federal, state and local laws and regulations in addition to gaming regulations. The Illinois terminal operator license, which is not transferable or assignable, requires compliance with applicable regulations and the license is renewable annually unless sooner cancelled or terminated. In July 2020, the Georgia Lottery Corporation approved one of the Company's consolidated subsidiaries as a Master Licensee, which allows the Company to install and operate coin operated amusement machines for commercial use by the public for play throughout the State of Georgia . The Company operates 11,597 and 10,346 video gaming terminals across 2,363 and 2,290 locations in the State of Illinois as of September 30, 2020 and 2019, respectively. On November 20, 2019, the Company consummated a business combination which was accounted for as a reverse recapitalization. For more details on the reverse recapitalization, see Note 3 to the Company's Consolidated Financial Statements as presented in its Annual Report on Form 10-K for the year ended December 31, 2019. As a result of the reverse recapitalization, all references to numbers of common shares and per common share data for 2019 in these condensed consolidated financial statements and related notes have been retroactively adjusted to account for the effect of the reverse recapitalization. The Company is an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (“ JOBS Act ”) following the consummation of the reverse recapitalization. The Company has elected to use this extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act and as a result of this election, its financial statements may not be comparable to companies that comply with public company effective dates. The Company will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year (a) following June 30, 2022, (b) in which Accel has total annual gross revenue of at least $1.0 billion or (c) in which Accel is deemed to be a large accelerated filer, which means the market value of Class A-1 Shares that is held by non-affiliates exceeds $700 million as of the last business day of the prior second fiscal quarter, and (ii) the date on which Accel has issued more than $1.0 billion in non-convertible debt during the prior three-year period. Impact of COVID-19 on the Condensed Consolidated Financial Statements In response to the COVID-19 outbreak, the Illinois Gaming Board (“IGB”) made the decision to shut down all video gaming terminals (“VGTs”) across the State of Illinois starting at 9:00 p.m. on March 16, 2020 and ultimately extended the shutdown through June 30, 2020. The temporary shutdown of Illinois video gaming impacted 106 of the 274 gaming days (or 39% of gaming days) during the nine months ended September 30, 2020. In light of these events and their effect on the Company’s employees and licensed establishment partners, the Company took action to position the Company to help mitigate the effects of the temporary cessation of operations by, among other things, furloughing approximately 90% of its employees and deferring certain payments to major vendors. Additionally, members of the Company's senior management decided to voluntarily forgo their base salaries until the resumption of video gaming operations. Beginning in early June, the Company started reinstating employees from furlough in anticipation of resuming operations on July 1, 2020. As a result of these developments, the Company's revenues, results of operations and cash flows have been materially affected, and the Company expects it to continue for at least as long as COVID-19 is a threat to the public health. The situation is rapidly changing and additional impacts to the business may arise that the Company is not aware of currently. The Company incurred non-recurring, one-time expenses of $0.2 million and $2.1 million for the three and nine months ended September 30, 2020, respectively, for costs to provide benefits (e.g. health insurance) for furloughed employees during COVID-19 operational disruptions. These costs are included within other expenses, net. The Company also spent $1.9 million in capital costs for the nine months ended September 30, 2020 related to the purchase of IGB-mandated spacers for its VGTs to promote social distancing requirements within the gaming area and incurred operating expenses of $0.4 million and $0.7 million for the three and nine months ended September 30, 2020 related to cleaning, disinfecting and sanitizing supplies. As part of the Company's analysis of the financial reporting impacts of the COVID-19 outbreak, and corollary response in the State of Illinois, including the temporary shutdown of our gaming operations, the Company evaluated its goodwill and long-lived assets for potential impairment triggers as of September 30, 2020. As a result of this analysis, no impairment losses were recorded. The Company will continue to monitor its assets for potential impairment losses in future periods. While the IGB has announced the resumption of all video gaming activities effective July 1st, it is possible that it or the State of Illinois may order a shutdown by region (currently 11 regions), or a complete suspension of video gaming in the state, or institute stay-at-home, closure or other similar orders or measures in the future in response to a resurgence of COVID-19 or other events. If this were to occur, the Company could recognize impairment losses which could be material. The Company also engaged a third-party valuation firm to assist in determining the fair value of its investment in convertible notes as of September 30, 2020. The valuation concluded that the carrying amount of the investment in the convertible notes approximates the fair value in all material respects, as of September 30, 2020. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of presentation and preparation : The condensed consolidated financial statements and accompanying notes were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements include the accounts of the Company and of its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the condensed consolidated financial statements include all recurring adjustments and normal accruals necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In preparing our condensed consolidated financial statements, we applied the same significant accounting policies as described in Note 2 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. Any significant changes to those accounting policies are discussed below. Interim results are not necessarily indicative of results for a full year. Adopted accounting pronouncements : In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ ASU ”) No. 2014-09 (“ ASU 2014-19 ”) , Revenue from Contracts with Customers (Topic 606) , which amends the existing revenue recognition guidance and creates a new topic for Revenue from Contracts with Customers. The guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance also substantially revises required interim and annual disclosures. The Company, as an emerging growth company, elected to use the non-public effective date and adopted the standard in the fourth quarter of 2019 for the annual period ended December 31, 2019. The Company also elected the modified retrospective adoption approach and applied the standard to all contracts open as of January 1, 2019. The Company's quarterly financial statements and disclosure for the first nine months of 2019 reflect the previous accounting standard of FASB Accounting Standards Codification (“ ASC ”) 605, Revenue Recognition , and will not be restated for the adoption of Topic 606. The cumulative impact of the new revenue standard for fiscal year 2019 was recorded in the fourth quarter of 2019 and reflects the adjustment as if the Company adopted the standard as of January 1, 2019. The timing and amount of revenue recognized by the Company did not change upon the adoption of the new standard, however the Company's accounting for route acquisition costs was impacted. ASC 340-40, Other Assets and Deferred Costs - Contracts With Customers (“ASC 340-40”), issued in conjunction with ASU 2014-09, provides updated guidance around accounting for the incremental costs of obtaining a contract with a customer and for the costs incurred to fulfill a contract with a customer. ASC 340-40 states that an entity should amortize contract cost assets “on a systemic basis that is consistent with the transfer to the customer of the good or services to which the asset relates”, which typically corresponds to the period in which revenue will be recognized. The Company chose straight-line amortization of the contracts as it felt that best depicted when revenue would be recognized and when customers are visiting the gaming establishments. When determining the appropriate amortization period under ASC 340-40, the Company evaluated the impact of any renewal clauses that are likely to be exercised. The Company focused on whether commissions paid for renewals were commensurate with commissions paid on the original contract. The Company determined the renewal commissions were not commensurate and the amortization period should include expected renewals. As such, the period over which route and customer acquisition costs are amortized was extended to include expected renewals which resulted in an increase to the average life to 12.4 years. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which intends to simplify the guidance by removing certain exceptions to the general principles and clarifying or amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company early adopted the new standard in Q2 2020 (effective January 1, 2020) on a prospective basis. The adoption of the new standard did not have a material impact on the Company's financial statements. Use of estimates : The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and (iii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates used by the Company include, among other things, the useful lives for depreciable and amortizable assets, income tax provisions, the evaluation of the future realization of deferred tax assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with business acquisitions, the selection of useful lives for depreciable and amortizable assets in conjunction with business acquisitions, the valuation of level 3 investments, contingencies, and the expected term of share-based compensation awards and stock price volatility when computing share-based compensation expense. The Company also estimated stock prices prior to the reverse recapitalization discussed in Note 1 when computing share-based compensation expense. Actual results may differ from those estimates. Change in estimate: During the first quarter of 2020, the Company conducted a review of its estimate of depreciable lives for its video gaming terminals and equipment. As a result of this review, the Company extended the useful lives of its video gaming terminals and equipment from 7 to 10 years as the equipment is lasting longer than originally estimated. The Company has many video gaming terminals and equipment that were purchased when the Company started operations that are still being used today. The impact of this change in estimate for the three and nine months ended September 30, 2020, was as follows (in thousands): Three months ended Nine months ended September 30, 2020 September 30, 2020 Decrease to depreciation expense $ 1,872 $ 6,383 Increase to net income/decrease to net loss $ 1,338 $ 4,564 Increase to net income per share/decrease to net loss per share $ 0.02 $ 0.06 Segment information : The Company operates as a single operating segment. The Company’s chief operating decision maker (“CODM”) is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The CODM assesses the Company’s performance and allocates resources based on consolidated results, and this is the only discrete financial information that is regularly reviewed by the CODM. Cash and cash equivalents : Cash and cash equivalents include bank deposit accounts; term bank deposit accounts; uncollected cash in the Company’s video gaming terminals, ATMs, and redemption terminals; and cash in Company vaults. The Company’s policy is to limit the amount of credit exposure to any one financial institution. The Company maintains its cash in accounts which may at times exceed Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses in such accounts. Property and equipment : Property and equipment are stated at cost or fair value at the date of acquisition. Maintenance and repairs are charged to expense as incurred. Major additions, replacements and improvements are capitalized. Spare parts are included in other current assets when acquired and are expensed when used to repair equipment. Depreciation has been computed using the straight-line method over the following estimated useful lives: Years Video gaming terminals and equipment 10 Amusement and other equipment 7 Office equipment and furniture 7 Computer equipment and software 3-5 Leasehold improvements 5 Vehicles 5 Buildings and improvements 15-29 Leasehold improvements are amortized over the shorter of the useful life or the lease. Development costs directly associated with the acquisition, development and construction of a project are capitalized as a cost of the project during the periods in which activities necessary to prepare the property for its intended use are in progress. Interest costs associated with major construction projects are capitalized as part of the cost of the constructed assets. When no debt is incurred specifically for a project, interest is capitalized on amounts expended for the project using the weighted-average cost of borrowing. Capitalization of interest ceases when the project (or discernible portions of the project) is substantially complete. If substantially all of the construction activities of a project are suspended, capitalization of interest will cease until such activities are resumed. Stock-based compensation : The Company grants common stock options and/or restricted stock units to certain employees and officers. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as general and administrative expense over the employee’s requisite service period. Recent accounting pronouncements : In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases . In July 2018, the FASB also issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements , which provides an optional transition method allowing the standard to be applied at the adoption date. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for the Company's fiscal year beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 , unless the Company disqualifies as an emerging growth company, in which case earlier adoption may be required . A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest |
Investment in Convertible Notes
Investment in Convertible Notes | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment in Convertibles Notes | Investment in Convertible Notes On July 19, 2019, the Company entered into an agreement to purchase up to $30.0 million in convertible promissory notes from another terminal operator that bear interest at 3% per annum . The Company has the option of converting the notes to common stock of the terminal operator prior to the maturity date. At closing, the Company purchased a $5.0 million note which is subordinated to the terminal operator’s credit facility and matures six months following the satisfaction of administrative conditions. On October 11, 2019, the Company purchased an additional $25.0 million note which is also subordinated to the terminal operator’s credit facility and, beginning on July 1, 2020, the balance of this note, if not previously converted, will be payable in equal $1,000,000 monthly installments until all principal has been repaid in full. On July 30, 2020, the Company and the terminal operator entered into the Omnibus Amendment (the “Amendment”) to the original agreement to purchase convertible promissory notes from the terminal operator. The Amendment, among other things, extends the maturity date of the $5.0 million convertible note and the beginning of the payback period for the $25.0 million convertible note until December 31, 2020. The carrying amount of the investment in the convertible notes approximates the fair value, in all material respects, as of September 30, 2020. F or more information on how the Company determined the fair value of the convertible notes, see Note 10. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consists of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Video game terminals and equipment $ 183,736 $ 166,850 Amusement and other equipment 21,547 16,417 Office equipment and furniture 1,590 1,540 Computer equipment and software 11,469 8,715 Leasehold improvements 1,650 44 Vehicles 10,702 9,304 Buildings and improvements 10,845 12,075 Land 911 911 Construction in progress 606 768 Total property and equipment 243,056 216,624 Less accumulated depreciation and amortization (112,400) (97,423) Property and equipment, net $ 130,656 $ 119,201 Depreciation and amortization of property and equipment amounted to $5.4 million and $15.3 million for the three and nine months ended September 30, 2020, respectively. In comparison, depreciation and amortization of property and equipment amounted to $6.5 million and $18.7 million for the three and nine months ended September 30, 2019 , respectively |
Route and Customer Acquisition
Route and Customer Acquisition Costs | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Route and Customer Acquisition Costs | Route and Customer Acquisition Costs The Company enters into contracts with third parties and licensed video gaming locations throughout the State of Illinois which allow the Company to install and operate video gaming terminals. When video gaming operations commence, payments are due monthly or quarterly. Gross payments due, based on the number of live locations, are approximately $6.6 million and $7.4 million as of September 30, 2020 and December 31, 2019, respectively. Payments are due over varying terms of the individual agreements and are discounted at the Company’s incremental borrowing rate associated with its long-term debt at the time the contract is acquired. The net present value of payments due is $5.8 million and $6.5 million as of September 30, 2020 and December 31, 2019, respectively, of which approximately $1.6 million and $1.7 million is included in current liabilities in the accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively. The route and customer acquisition cost asset is comprised of payments made on the contracts of $18.3 million and $18.7 million as of September 30, 2020 and December 31, 2019, respectively. The Company has upfront payments of commissions paid to the third parties for the acquisition of the customer contracts that are subject to a claw back provision if the customer cancels the contract prior to completion. The payments subject to a claw back are $1.8 million and $2.2 million as of September 30, 2020 and December 31, 2019, respectively. Route and customer acquisition costs consist of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Cost $ 28,032 $ 28,501 Accumulated amortization (11,914) (11,102) Route and customer acquisition costs, net $ 16,118 $ 17,399 Amortization expense of route and customer acquisition costs was $0.5 million and $1.4 million for the three and nine months ended September 30, 2020 |
Location Contracts Acquired
Location Contracts Acquired | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Location Contracts Acquired | Location Contracts Acquired Location contract assets acquired in business acquisitions are recorded at acquisition at fair value based on an income approach. Location contracts acquired consist of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Cost $ 208,449 $ 204,353 Accumulated amortization (52,917) (37,570) Location contracts acquired, net $ 155,532 $ 166,783 Amortization expense of location contracts acquired was $5.2 million and $15.4 million, during the three and nine months ended September 30, 2020 , respectively. In comparison, amortization expense of location contracts acquired was $3.6 million and $11.2 million, during the three and nine months ended September 30, 2019 , respectively. |
Goodwill
Goodwill | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill On September 16, 2019, the Company acquired Grand River Jackpot which was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill of $34.5 million as of September 30, 2020 and December 31, 2019 , of which $28.7 million is deductible for tax purposes. As previously discussed in Note 1, the Company evaluated its goodwill for potential impairment triggers as of September 30, 2020 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Debt The Company’s debt as of September 30, 2020 and December 31, 2019, consisted of the following (in thousands): September 30, December 31, 2019 Senior Secured Credit Facility: Revolving credit facility $ 5,000 $ 58,500 Term Loan 231,000 240,000 Delayed Draw Term Loan (DDTL) 121,125 60,000 Total debt 357,125 358,500 Less: Debt issuance costs (8,118) (8,808) Total debt, net of debt issuance costs 349,007 349,692 Less: Current maturities (18,250) (15,000) Total debt, net of current maturities $ 330,757 $ 334,692 2019 Senior Secured Credit Facility On November 13, 2019, in order to refinance its prior credit facility, for working capital and other general purposes from time to time, the Company entered into a credit agreement (the “Credit Agreement”) as borrower, the Company and its wholly-owned domestic subsidiaries, as a guarantor, 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: • $100.0 million revolving credit facility, including a letter of credit facility with a $10.0 million sublimit and a swing line facility with a $10.0 million sublimit, • $240.0 million initial term loan facility and • $125.0 million additional term loan facility. As a result of the COVID-19 pandemic and the temporary shutdown of its operations by the IGB, the Company borrowed $65 million on its delayed draw term loan in March 2020 to increase its cash position and help preserve its financial flexibility. As of September 30, 2020 , there remained approximately $95.0 million of availability under the Credit Agreement. The obligations under the Credit Agreement are guaranteed by the Company and its wholly-owned domestic subsidiaries, subject to certain exceptions (collectively, the “Guarantors”). The obligations under the Credit Agreement are secured by substantially all of assets of the Guarantors, subject to certain exceptions. Certain future-formed or acquired wholly-owned domestic subsidiaries of the Company will also be required to guarantee the Credit Agreement and grant a security interest in substantially all of its assets (subject to certain exceptions) to secure the obligations under the Credit Agreement. Borrowings under the Credit Agreement bear interest, at the Company’s option, at a rate per annum equal to either (a) the adjusted LIBOR rate (“LIBOR”) (which cannot be less than 0.5%) for interest periods of 1, 2, 3 or 6 months (or if consented to by (i) each applicable Lender, 12 months or any period shorter than 1 month or (ii) the Agent, a shorter period necessary to ensure that the end of the relevant interest period would coincide with any required amortization payment ) plus the applicable LIBOR margin or (b) the alternative base rate (“ABR”) plus the applicable ABR margin. ABR is a fluctuating rate per annum equal to the highest of (i) the Federal Funds Effective Rate plus 1/2 of 1.0%, (ii) the prime rate announced from time to time by Capital One, National Association and (iii) LIBOR for a 1-month Interest Period on such day plus 1.0%. The Credit Agreement also includes provisions for determining a replacement rate when LIBOR is no longer available. As of September 30, 2020 , the weighted-average interest rate was approximately 3.2%. Interest is payable quarterly in arrears for ABR loans, at the end of the applicable interest period for LIBOR loans (but not less frequently than quarterly) and upon the prepayment or maturity of the underlying loans. The Company is required to pay a commitment fee quarterly in arrears in respect of unused commitments under the revolving credit facility and the additional term loan facility. Additionally, the Company is required to pay an upfront fee with respect to any funded additional term loans. The applicable LIBOR and ABR margins and the commitment fee rate are calculated based upon the first lien net leverage ratio of the Company and its restricted subsidiaries on a consolidated basis, as defined in the Credit Agreement. Until the delivery of the initial financial statements under the Credit Agreement, the revolving loans and term loans bear interest, at the option of the Company, at either (a) ABR plus a margin of 1.25% or (b) LIBOR plus a margin of 2.25%. The additional term loan facility is available for borrowings until November 13, 2020. Each of the revolving loans and the term loans mature on November 13, 2024. The term loans and, once drawn, the additional term loans will amortize at an annual rate equal to approximately 5.00% per annum. Upon the consummation of certain non-ordinary course asset sales, the Company may be required to apply the net cash proceeds thereof to prepay outstanding term loans and additional term loans. The loans under the Credit Agreement may be prepaid without premium or penalty, subject to customary LIBOR “breakage” costs. The Credit Agreement contains certain customary affirmative and negative covenants and events of default, and requires the Company and certain of its affiliates obligated under the Credit Agreement to make customary representations and warranties in connection with credit extensions thereunder. In addition, the Credit Agreement requires the Company to maintain (a) a ratio of consolidated first lien net debt to consolidated EBITDA no greater than 4.50 to 1.00 and (b) a ratio of consolidated EBITDA to consolidated fixed charges no less than 1.20 to 1.00, in each case, tested as of the last day of each full fiscal quarter ending after the Closing Date and determined on the basis of the four most recently ended fiscal quarters of the Company for which financial statements have been delivered pursuant to the Credit Agreement, subject to customary “equity cure” rights. 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. The Company was in compliance with all debt covenants as of September 30, 2020. Given the Company's assumptions about the future impact of COVID-19 on the gaming industry, which could be materially different due to the inherent uncertainties of future restrictions on the industry, the Company expects to remain in compliance with all debt covenants for the next 12 months. However, given the uncertainty of COVID-19 and the resulting potential impact to the gaming industry and its future assumptions, as well as to provide additional financial flexibility, the Company and the other parties thereto amended the Credit Agreement on August 4, 2020 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). The amendment also raised the floor for the adjusted LIBOR rate to 0.5% and the floor for the Base Rate to 1.50%. The Company incurred costs of $0.4 million associated with the amendment of the Credit Agreement, of which $0.3 million will be capitalized and amortized over the remaining life of the Facility. Unamortized debt issuance costs related to the Facility were $8.1 million and $8.8 million as of September 30, 2020 and December 31, 2019, respectively. Prior Credit Facility The Company's Prior Credit Facility was a senior secured first lien credit facility, as amended, that consisted of a $125.0 million term loan, a contract draw loan facility of $170.0 million and a revolving credit facility of $85.0 million. The Company’s prior credit facility was with a syndicated group of banks with CIBC Bank USA, as administrative agent for the lenders. Included in the revolving credit facility and contract draw loan were swing line sub-facilities of $5.0 million each. The Prior Credit Facility was paid off with the proceeds from the 2019 Senior Secured Credit Facility |
Business and Asset Acquisitions
Business and Asset Acquisitions | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Business and Asset Acquisitions | Business and Asset Acquisitions 2020 Business Acquisition On July 22, 2020 (the “Closing Date”), the Company acquired Tom’s Amusement Company, Inc., (“Tom's Amusements”) a southeastern U.S. gaming and amusement operator and Master Licensee in the state of Georgia. The total purchase price was $3.6 million, of which the Company paid $2.1 million in cash at closing. The remaining $1.5 million of contingent consideration payables are to be paid in cash on the 18-month and 24-month anniversaries of the Closing Date. The amount of each payment is $750,000 multiplied by a performance ratio. The fair value of the contingent consideration was $1.4 million as of September 30, 2020 and is included within consideration payable on the condensed consolidated balance sheets. In addition, the Georgia Lottery Corporation approved Accel's operating subsidiary, Bulldog Gaming, LLC, as a Master Licensee, which allows the Company to install and operate coin operated amusement machines for commercial use by the public for play throughout the State of Georgia. The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . The purchase price of $3.6 million has been preliminarily allocated to the following assets: i) video game terminals and equipment totaling $1.6 million; ii) location contracts totaling $0.8 million; iii) indefinite-lived gaming license intangible asset of $1.0 million and; iv) cash of $0.2 million. The areas of the purchase price allocation that are not yet finalized are primarily related to the valuation of location contracts and the indefinite-lived gaming license intangible asset. 2020 Asset Acquisition On August 6, 2020, pursuant to the terms of an asset purchase agreement, the Company purchased from Illinois Operators, Inc. terminal use agreements and equipment representing the operations of 13 licensed establishments. The Company has accounted for this transaction as an asset acquisition. The purchase consideration of $4.0 million consisted of: i) cash payment of $3.7 million paid at closing and; ii) deferred payment of $0.3 million which is payable 90-days from the closing date. The asset acquisition costs were allocated to the following assets: i) video game terminals and equipment totaling $0.6 million and; ii) location contracts totaling $3.4 million. 2019 Business Acquisition Grand River Jackpot On August 26, 2019, the Company entered into an agreement to acquire all issued and outstanding membership interests in Grand River Jackpot, LLC and subsidiaries (“Grand River”), a terminal operator licensed by the State of Illinois Gaming Board. On September 16, 2019, the Company completed its acquisition of Grand River. Grand River had 2,009 VGTs in over 450 licensed establishments. The Company completed this transaction in order to expand its presence within the State of Illinois. The acquisition aggregate purchase consideration transferred totaled $113.7 million, which included: i) a cash payment made at closing of $100.0 million; ii) a subsequent cash payment of approximately $6.6 million for a working capital adjustment and; iii) contingent purchase consideration with an estimated fair value of $7.1 million. The contingent consideration represents two installment payments that are to be paid, up to a maximum amount, as follows: i) $2.5 million within 30 days following the one- year anniversary of the acquisition closing date and; ii) $7.0 million within 30 days following the three-year anniversary of the acquisition closing date. These payments are subject to adjustment based on certain performance measures included within the purchase agreement. The estimated fair value was determined based on the Company’s expected probability of future payment, discounted using Grand River’s weighted average cost of capital. The cash payment made at closing and subsequent working capital adjustment payment were both funded by the Company’s credit facilities. In light of the temporary suspension of gaming by the IGB due to the COVID-19 pandemic, the Company reversed its contingent liability for the previously mentioned $2.5 million installment payment due 30 days following the one-year anniversary of the acquisition closing date in the first quarter of 2020 as it is unlikely the performance measures for the period will be reached. The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The Company's purchase price allocation was finalized in the first quarter of 2020 and the Grand River acquisition resulted in goodwill of $34.5 million as a result of a higher consideration multiple paid relative to prior similar acquisitions driven by maturity and quality of the operations and industry, including workforce and corresponding synergies, and is amortizable for income tax purposes. The condensed consolidated statements of operations include $26.7 million of revenue and $1.8 million of net income attributable to operations of Grand River for the nine months ended September 30, 2020. 2019 Asset Acquisition On September 23, 2019, pursuant to the terms of an asset purchase agreement, the Company purchased from Illinois Gaming Systems, LLC (“IGS”) terminal use agreements and equipment representing the operations of 139 video game terminals in 29 licensed establishments. The Company has accounted for this transaction as an asset acquisition. The purchase consideration consisted of: i) cash payment of $2.4 million paid at closing and; ii) note payable of $2.3 million issued at closing which was recorded in consideration payable. The asset acquisition costs were allocated to the following assets: i) video game terminals and equipment totaling $1.7 million and; ii) location contracts totaling $3.0 million. The note payable bore interest at 5% and was paid in full in March 2020. Pro Forma Results The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three and nine months ended September 30, 2019 as if the acquisition of Grand River had occurred as of January 1, 2018, after giving effect to certain purchase accounting adjustments. These amounts are based on available financial information of the acquiree prior to the acquisition date and are not necessarily indicative of what Company’s operating results would have been had the acquisition actually taken place as of January 1, 2018. This unaudited pro forma information does not project revenues and net income post acquisition (in thousands). Three months ended Nine months ended September 30, 2019 September 30, 2019 Revenues $ 113,165 $ 345,067 Net (loss) income (720) 9,991 Consideration Payable The Company has a contingent consideration payable related to certain locations, as defined, in the respective acquisition agreement which are placed into operation during a specified period after the acquisition date. The fair value of contingent consideration is included in the consideration payable on the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019. The contingent consideration accrued is measured at fair value on a recurring basis. Current and long-term portions of consideration payable consist of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, 2020 December 31, 2019 Current Long-Term Current Long-Term TAV $ 490 $ 3,249 $ 490 $ 3,497 Abraham — — 55 — Fair Share Gaming 1,258 601 1,057 899 Family Amusement 391 2,576 293 2,815 Skyhigh 532 4,272 763 3,948 G3 295 141 2,952 154 Grand River — 5,587 2,304 5,113 IGS 80 — 2,379 — Illinois Operators 300 — — — Tom's Amusements — 1,445 — — Total $ 3,346 $ 17,871 $ 10,293 $ 16,426 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value and the corresponding disclosure requirements around fair value measurements. This topic applies to all financial instruments that are being measured and reported on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the various methods including market, income and cost approaches are used. Based on these approaches, certain assumptions are utilized that the market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. Valuation techniques are utilized that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, it is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1 : Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 : Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities. Level 3 : Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. Convertible promissory notes In valuing it's convertible promissory notes at September 30, 2020 and December 31, 2019, the Company utilized a binomial lattice model in which a convertible instrument is split into two separate components: a cash-only (debt) component and an equity component. The binomial lattice trees are constructed using a methodology that assigns up and downward movement factors and probabilities based on rates of return, volatility, and time. It allows for the optional conversion features of the convertible promissory notes to be captured by determining whether conversion or continuing to hold is the most economically advantageous to the holder. Upon conversion, future values in the equity component are subject to only the risk-free rate, while the cash-only component associated with continuing to hold the debt instrument is subject to the selected risk-adjusted discount rate. Solving backwards through the trees associated with the equity component and the trees associated with the debt component yields an aggregate discounted value for each. The sum of these values yields the indicated fair value of the convertible promissory notes. The discount rate is the risk-adjusted discount rate that is implied by the rate that allows the discounted cash flows with all terms and conditions modeled to equal the total cash consideration. As such, after modeling the features of convertible promissory notes as of the issuance date using the lattice model framework outlined above, the Company solved for the discount rate that resulted in a value for the note equal to the total cash consideration. The valuation of the Company's convertible promissory notes is considered to be a Level 3 fair value measurement as the significant inputs are unobservable and require significant judgment or estimation. For interim periods, the Company evaluates the underlying assumptions used in the latest valuation and determines whether there have been any significant changes to those assumptions based on current events to determine if a revaluation is necessary. Based on the economic impacts of COVID-19, the Company engaged a third-party valuation firm to assist in determining the fair value of its investment in convertible notes as of September 30, 2020 . The valuation concluded that the carrying amount of the investment in the convertible notes approximates the fair value in all material respects, as of September 30, 2020 . Contingent consideration The following tables summarize the Company’s liabilities that are measured at fair value on a recurring basis (in thousands): Fair Value Measurement at Reporting Date Using September 30, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Contingent consideration $ 14,211 $ — $ — $ 14,211 Fair Value Measurement at Reporting Date Using December 31, 2019 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Contingent consideration $ 17,327 $ — $ — $ 17,327 The Company uses a discounted cash flow analysis to determine the value of contingent consideration upon acquisition and updates this estimate on a recurring basis. The significant assumptions in the Company's cash flow analysis includes the probability adjusted projected revenues after state taxes, a discount rate as applicable to each acquisition, and the estimated number of locations that “go live” with the Company during the contingent consideration period. A hypothetical 1% increase in the applicable discount rate would decrease other expenses, net by approximately $0.2 million while a hypothetical 1% decrease in the applicable discount rate would increase other expenses, net by approximately $0.2 million. Changes in the fair value of contingent consideration liabilities are classified within other expenses, net on the accompanying condensed consolidated statements of operations. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity As discussed in Note 1, on November 20, 2019, the Company, consummated a reverse recapitalization . Pursuant to the Certificate of Incorporation as amended on November 20, 2019 and as a result of the reverse recapitalization, the Company has retrospectively adjusted the shares issued and outstanding prior to November 20, 2019 to give effect to the exchange ratio used to determine the number of Class A-1 shares of common stock into which they were converted . P ursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation, the Company authorized and has available for issuance the following shares and classes of capital stock, each with a par value of $0.0001 per share: i) 1,000,000 shares of preferred stock; ii) 250,000,000 shares of Class A-1 Common Stock, ii) 10,000,000 shares of Class A-2 Common Stock. Class A-1 Common Stock The holders of the Class A-1 Common Stock are entitled to one vote for each share. The holders of Class A-1 Common Stock are entitled to receive dividends or other distributions when and if declared from time to time and share equally on a per share basis in such dividends and distributions subject to such rights of the holders of preferred stock. On September 28, 2020, the Company completed an underwritten public offering (the “Offering”) of 8,000,000 shares of its Class A-1 common stock (par value $0.0001 per share) at a price of $10.50 per share for a total offering size of $84.0 million. The Company received net proceeds from the sale of shares of Class A-1 Common Stock sold by it in the Offering of approximately $78.7 million (net of underwriting discounts and commissions). The Company incurred offering costs totaling $5.3 million which have been capitalized to additional paid-in capital. The Offering also granted the underwriters an option to purchase up to 1,200,000 additional shares of Class A-1 common stock at the public offering price of $10.50 less the underwriting discount, exercisable at any time within 30 days of September 23, 2020. Class A-2 Common Stock The holders of the Class A-2 Common Stock do not have voting rights and are not entitled to receive or participate in any dividends or distributions when and if declared from time to time. 5,000,000 shares of Class A-2 Common Stock were issued with other consideration in conjunction with the reverse recapitalization , subject to the conditions set forth in a restricted stock agreement, which sets forth the terms upon which the Class A-2 Shares will be exchanged for an equal number of validly issued, fully paid and non-assessable Class A-1 Shares. The exchange of Class A-2 Shares for Class A-1 Shares will be subject to the terms and conditions set forth in the Restricted Stock Agreement, with such exchanges occurring in three separate tranches upon the satisfaction of the following triggers: • Tranche I, equal to 1,666,666 Class A-2 Shares, will be exchanged for Class A-1 Shares if either (i) the EBITDA for the last twelve months (“ LTM EBITDA ”) of the Company (as determined pursuant to the Restricted Stock Agreement) as of December 31, 2021, March 31, 2022 or June 30, 2022 equals or exceeds $132 million or (ii) the closing sale price of Class A-1 Shares on the New York Stock Exchange (“ NYSE ”) equals or exceeds $12.00 for at least twenty trading days in any consecutive thirty trading day period; • Tranche II, equal to 1,666,667 Class A-2 Shares, will be exchanged for Class A-1 Shares if either (i) the LTM EBITDA of the Company (as determined pursuant to the Restricted Stock Agreement) as of December 31, 2022, March 31, 2023 or June 30, 2023 equals or exceeds $152 million or (ii) the closing sale price of Class A-1 Shares on the NYSE equals or exceeds $14.00 for at least twenty trading days in any consecutive thirty trading day period; and • Tranche III, equal to 1,666,667 Class A-2 Shares, will be exchanged for Class A-1 Shares if either (i) the LTM EBITDA of the Company (as determined pursuant to the Restricted Stock Agreement) as of December 31, 2023, March 31, 2024 or June 30, 2024 equals or exceeds $172 million or (ii) the closing sale price of Class A-1 Shares on the NYSE equals or exceeds $16.00 for at least twenty trading days in any consecutive thirty trading day period. The Restricted Stock Agreement further provides that holders of Class A-2 Shares are not required to exchange such shares for Class A-1 Shares if, (x) prior to giving effect to exchanges pursuant to the triggers described above, such holder beneficially owns less than 4.99% of the issued and outstanding Class A-1 Shares, and (y) after giving effect to the exchanges pursuant to the triggers described above, such holder would beneficially own in excess of 4.99% of the issued and outstanding Class A-1 Shares. However, notwithstanding the limitation described in the previous sentence, if and when a holder of Class A-2 Shares has obtained all required gaming approvals from the applicable gaming authorities permitting such holder to beneficially own Class A-1 Shares in excess of 4.99%, then the Class A-2 Shares held by such holder which are subject to exchange shall immediately be exchanged for Class A-1 Shares without regard to the limitation. On January 14, 2020, the market condition for the conversion of Tranche I was satisfied. However, as discussed above, no shareholder is permitted to own more than 4.99% of the issued and outstanding Class A-1 Shares after the conversion unless obtaining required gaming approvals from the applicable gaming authorities. In connection with the conversion, no gaming approvals were obtained. As a result, only 1,596,636 of the 1,666,667 Class A-2 shares were converted into Class A-1 shares. Warrants On January 31, 2013, the Company issued 253,575 warrants to certain individual shareholders as compensation for providing a personal guaranty for a revolving loan agreement. The warrants granted their holders the right to purchase the Company’s Class A-1 Common Shares at the price of $17.80 per share anytime from January 31, 2013 through January 30, 2020. The warrants were classified as an equity instrument. As of September 30, 2020 and 2019, there were 0 and 15,750 warrants outstanding. All warrants were exercised prior to the reverse recapitalization. 7,333,326 warrants to purchase shares of Class A-1 Common Stock were issued with other consideration prior to the reverse recapitalization (the “2019 Warrants”). As a part of the reverse recapitalization, 2,444,437 2019 Warrants were canceled and reissued under the same terms and conditions to Accel legacy shareholders. Each warrant expires five years from issuance and entitles the holder to purchase one Class A-1 Share at an exercise price of $11.50 per share, subject to adjustments substantially similar to those applicable to the other outstanding warrants, at any time 30 days after the consummation of the reverse recapitalization . In 2017, 15,000,000 warrants to purchase shares of Class A-1 Common Stock were issued (“Public Warrants”). Each warrant expires five years from issuance and entitles the holder to purchase one Class A-1 Share at an exercise price of $11.50 per share, subject to adjustments substantially similar to those applicable to the other outstanding warrants, at any time 30 days after the consummation of the reverse recapitalization. On July 14, 2020, the Company announced that it had commenced an exchange offer (the "Offer") to all holders of its outstanding warrants to receive 0.250 shares of Class A-1 Common Stock in exchange for each warrant tendered pursuant to the Offer. The Offer was open until 11:59 p.m., Eastern Standard Time, on August 11, 2020. On July 16, 2020, the Company consummated the redemption of its Public Warrants. The Company exchanged each Public Warrant for 0.250 shares of the Company’s Class A-1 Common Stock and issued 3,784,416 shares of its Class A-1 Common Stock in exchange for the Public Warrants at settlement of the redemption. The exchange was an equitable exchange at fair value. On July 22, 2020, the Company received written notice from the New York Stock Exchange (the “NYSE”) that the NYSE |
Stock-based Compensation
Stock-based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-based Compensation | Stock-based Compensation The Company grants various types of stock-based awards. Stock compensation awards granted are valued on the date of grant and are expensed over the required service period. The Company previously adopted the 2011 Equity Incentive Plan of Accel Entertainment, Inc., and the 2016 Equity Incentive Plan of Accel Entertainment, Inc. In conjunction with the closing of the reverse recapitalization, the Accel Entertainment, Inc. Long Term Incentive Plan (the “LTIP”) was adopted. The LTIP provides for grants of a variety of awards to employees and non-employees for providing services to the Company, including, but not limited to: incentive stock options qualified as such under U.S. federal income tax laws, stock options that do not qualify as incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, cash incentive awards, and other stock-based awards. The Company has reserved, and in January 2020 registered, a total of 6,000,000 shares of Class A-1 common stock for issuance pursuant to the LTIP, subject to certain adjustments set forth therein. The term of any options to be granted are for a maximum of 10 years from the grant date. The exercise price of stock options shall not be less than 100% of the fair market value per share of common stock on the grant date. Under the LTIP, the Company granted 1.2 million options to eligible officers and employees of the Company during the first quarter of 2020, which shall vest over a period of 5 years. The Company also granted 0.2 million options to eligible officers of the Company during the third quarter of 2020, which shall vest over a period of 4 years. During the nine months ended September 30, 2020, the Company also issued 1.7 million restricted stock units (“RSUs”) to board of directors and certain employees, which shall vest over a period of 1 to 5 years for employees and a period of 6 months to 1 year for board of directors. The estimated grant date fair value of these options and RSUs totaled $25.1 million. Stock-based compensation expense, which pertains to the Company’s stock options and other equity awards, was $1.7 million and $4.1 million for the three and nine months ended September 30, 2020, respectively. In comparison, stock-based compensation expense was $0.1 million and $0.4 million for the three and nine months ended September 30, 2019, respectively. Stock-based compensation expense is included within general and administrative expenses in the condensed consolidated statements of operations. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company recognized an income tax benefit of $6.6 million and $11.8 million during the three and nine months ended September 30, 2020, respectively. In comparison, the Company recognized an income tax benefit of $0.7 million and income tax expense of $2.8 million during the three and nine months ended September 30, 2019, respectively. The Company calculates its (benefit from) provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pretax book income or loss. The effective tax rate (income taxes as a percentage of income before income taxes) was (118.8)% and 51.5% for the three and nine months ended September 30, 2020, respectively. In comparison, the effective tax rate was 30.4% and 29.0% for the three and nine months ended September 30, 2019, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Lawsuits and claims are filed against the Company from time to time in the ordinary course of business, including related to, employee matters, employment of professional and non-compete clauses and agreements. Other than settled matters explained as follows, these actions are in various stages, and no judgments or decisions have been rendered. Management, after reviewing matters with legal counsel, believes that the outcome of such matters will not have a material adverse effect on the Company’s financial position or results of operations. Accel has been involved in a series of related litigated matters stemming from claims that Accel wrongly contracted with 10 different licensed establishments (the “Defendant Establishments”) in 2012 in violation of the contractual rights held by J&J Ventures Gaming, LLC (“J&J”), as further described below. On August 21, 2012, one of the Company’s operating subsidiaries entered into certain agreements with Jason Rowell (“Rowell”), a member of Action Gaming LLC (“Action Gaming”), which was an unlicensed terminal operator that had exclusive rights to place and operate VGTs within a number of establishments, including the Defendant Establishments. Under agreements with Rowell, the Company agreed to pay him for each licensed establishment which decided to enter into exclusive location agreements with the Company. In late August and early September 2012, each of the Defendant Establishments signed separate location agreements with the Company, purporting to grant it the exclusive right to operate VGTs in those establishments. Separately, on August 24, 2012, Action Gaming sold and assigned its rights to all its location agreements to J&J, including its exclusive rights with the Defendant Establishments (the “J&J Assigned Agreements”). At the time of the assignment of such rights to J&J, the Defendant Establishments were not yet licensed by the Illinois Gaming Board (“IGB”). Action Gaming, J&J, and other parties, collectively, the Plaintiffs, filed a complaint against the Company, Rowell, and other parties in the Circuit Court of Cook County (the “Circuit Court”), on August 31, 2012, as amended on November 1, 2012, December 19, 2012, and October 3, 2013, alleging, among other things, that the Company aided and abetted Rowell in breaches of his fiduciary duties and contractual obligations with Action Gaming and tortiously interfered with Action Gaming’s contracts with Rowell and agreements assigned to J&J. The complaint seeks damages and injunctive and equitable relief. On January 24, 2018, the Company filed a motion to dismiss for lack of subject matter jurisdiction, as further described below. On May 14, 2018, the Circuit Court denied the Company’s motion to dismiss and granted a stay to the case, pending a ruling from the IGB on the validity of the J&J Assigned Agreements. From 2013 to 2015, the Plaintiffs filed additional claims, including J&J Ventures Gaming, LLC et al. v. Wild, Inc. (“Wild”), in various circuit courts seeking declaratory judgements with a number of establishments, including each of the Defendant Establishments, requesting declarations that, among other things, J&J held the exclusive right to operate VGTs at each of the Defendant Establishments as a result of the J&J Assigned Agreements. The Company was granted leave to intervene in all of the declaratory judgments. The circuit courts found that the J&J Assigned Agreements were valid because each of the underlying location agreements were between an unlicensed establishment and an unlicensed terminal operator, and therefore did not constitute use agreements that were otherwise precluded from assignment under the IGB’s regulations. Upon the Company’s appeal, the Illinois Appellate Court, Fifth District (the “District Court”), vacated the circuit courts’ judgments and dismissed the appeals, holding that the IGB had exclusive jurisdiction over the matter that formed the basis of the parties’ claims, and declined to consider the merits of the parties’ disputes. On September 22, 2016, and after the IGB intervened, the Supreme Court of Illinois issued a judgment in Wild , affirming the District Court’s decision vacating the circuit courts’ judgments for lack of subject matter jurisdiction and dismissing the appeals, determining that the IGB has exclusive jurisdiction to decide the validity and enforceability of VGT use agreements. Between May 2017 and September 2017, both the Company and J&J filed petitions with the IGB seeking adjudication of the rights of the parties and the validity of the use agreements. Those petitions have been fully briefed and remain pending. There is no indication as to when the IGB will rule on the petitions. The Company does not have a present estimate regarding the potential damages, if any, that could potentially be awarded in this litigation and, accordingly, have established no reserves relating to such matters. There are also petitions pending with the IGB which could lead to the Company obtaining new locations. On October 7, 2019, the Company filed a lawsuit in the Circuit Court of Cook County against Jason Rowell and other parties related to Mr. Rowell’s breaches of his non-compete agreement with the Company. The Company alleged that Mr. Rowell and a competitor were working together to interfere with the Company’s customer relationships. On November 7, 2019, Mr. Rowell filed a lawsuit in the Circuit Court of Cook County against the Company alleging that he had not received certain equity interests in the Company to which he was allegedly entitled under his agreement. The Company has answered the complaint and asserted a counterclaim, and intends to defend itself against the allegations. Mr. Rowell's claims and the Company's claims are both being litigated in this lawsuit, while the original lawsuit remains pending against the other defendants. The Company does not have a present estimate regarding the potential damages, nor does it believe any payment of damages is probable, and, accordingly, has established no reserves relating to these matters. On July 2, 2019, Illinois Gaming Investors, LLC filed a lawsuit against the Company. The lawsuit alleges that a current employee of the Company violated his non-competition agreement with Illinois Gaming Investors, LLC, and together with the Company, wrongfully solicited prohibited licensed video gaming locations. The lawsuit on its face seeks damages of $10,000,000. The parties are engaging in discovery. The Company is in the process of defending this lawsuit, and has not accrued any amounts as losses related to this suit are not probable or reasonably estimable. |
Related-Party Transactions
Related-Party Transactions | 9 Months Ended |
Sep. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | Related-Party Transactions Subsequent to the Company's acquisition of certain assets of Fair Share Gaming, LLC (“Fair Share”) and G3 Gaming, LLC (“G3”), the sellers became employees of the Company. Consideration payable to the Fair Share seller was $1.9 million and $2.0 million as of September 30, 2020 and December 31, 2019, respectively. Payments to the Fair Share seller under the acquisition agreement were $0.6 million during both of the nine months ended September 30, 2020 and 2019. Consideration payable to the G3 sellers was $0.4 million and $3.1 million as of September 30, 2020 and December 31, 2019, respectively. Payments to the G3 seller under the acquisition agreement were $2.5 million and $0.4 million during the nine months ended September 30, 2020 and September 30, 2019, respectively. Subsequent to the Fair Share acquisition, the seller of Fair Share joined the Company’s Board of Directors. The Company engaged Much Shelist, P.C. (“Much Shelist”), as its legal counsel for general legal and business matters. An attorney at Much Shelist is a related party to management of the Company. For the nine months ended September 30, 2020 and 2019, Accel paid Much Shelist $0.1 million, and $0.4 million, respectively. These payments were included in general and administrative expenses within the condensed consolidated statements of operations. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share As a result of the previously mentioned reverse recapitalization in Note 1, the Company has retrospectively adjusted the weighted average shares outstanding for the three and nine months ended September 30, 2019 to give effect to the exchange ratio used to determine the number of Class A-1 shares of common stock into which they were converted. The components of basic and diluted earning per share (“EPS”) were as follows for the three and nine months ended September 30 (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net (loss) income $ 12,143 $ (1,598) $ (11,097) $ 6,725 Basic weighted average outstanding shares of common stock 82,785 59,684 79,708 58,500 Dilutive effect of stock-based awards for common stock 771 — — 1,113 Dilutive effect of stockholder notes receivable for common stock — — — 927 Dilutive effect of warrants for common stock — — — 1,474 Dilutive effect of contingently convertible A-2 shares for common stock 3,403 — 0 0 Diluted weighted average outstanding shares of common stock 86,960 59,684 79,708 62,013 Earnings (loss) per share: Basic $ 0.15 $ (0.03) $ (0.14) $ 0.11 Diluted $ 0.14 $ (0.03) $ (0.14) $ 0.11 Since the Company was in a net loss position for the nine months ended September 30, 2020, and the three months ended September 30, 2019, there is no difference between basic and dilutive weighted average common stock outstanding. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsIn October 2020, the underwriters of the Offering partially exercised their option to purchase additional shares of the Company’s Class A-1 common stock and purchased an additional 1,133,015 shares at a price of $10.50 per share, resulting in additional net proceeds to the Company of approximately$11.3 million (net of underwriting discounts and commissions). |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of presentation and preparation | Basis of presentation and preparation : The condensed consolidated financial statements and accompanying notes were prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). |
Use of estimates | Use of estimates : The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and (iii) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates used by the Company include, among other things, the useful lives for depreciable and amortizable assets, income tax provisions, the evaluation of the future realization of deferred tax assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with business acquisitions, the selection of useful lives for depreciable and amortizable assets in conjunction with business acquisitions, the valuation of level 3 investments, contingencies, and the expected term of share-based compensation awards and stock price volatility when computing share-based compensation expense. The Company also estimated stock prices prior to the reverse recapitalization discussed in Note 1 when computing share-based compensation expense. Actual results may differ from those estimates. |
Segment information | Segment information : The Company operates as a single operating segment. The Company’s chief operating decision maker (“CODM”) is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the |
Cash and cash equivalents | Cash and cash equivalents : Cash and cash equivalents include bank deposit accounts; term bank deposit accounts; uncollected cash in the Company’s video gaming terminals, ATMs, and redemption terminals; and cash in Company vaults. The Company’s policy is to limit the amount of credit exposure to any one financial institution. The Company maintains its cash in accounts which may at times exceed Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses in such accounts. |
Property and equipment | Property and equipment : Property and equipment are stated at cost or fair value at the date of acquisition. Maintenance and repairs are charged to expense as incurred. Major additions, replacements and improvements are capitalized. Spare parts are included in other current assets when acquired and are expensed when used to repair equipment. Depreciation has been computed using the straight-line method over the following estimated useful lives: Years Video gaming terminals and equipment 10 Amusement and other equipment 7 Office equipment and furniture 7 Computer equipment and software 3-5 Leasehold improvements 5 Vehicles 5 Buildings and improvements 15-29 Leasehold improvements are amortized over the shorter of the useful life or the lease. |
Stock-based compensation | Stock-based compensation : The Company grants common stock options and/or restricted stock units to certain employees and officers. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as general and administrative expense over the employee’s requisite service period. |
Adopted accounting pronouncements / Recent accounting pronouncements | Adopted accounting pronouncements : In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ ASU ”) No. 2014-09 (“ ASU 2014-19 ”) , Revenue from Contracts with Customers (Topic 606) , which amends the existing revenue recognition guidance and creates a new topic for Revenue from Contracts with Customers. The guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance also substantially revises required interim and annual disclosures. The Company, as an emerging growth company, elected to use the non-public effective date and adopted the standard in the fourth quarter of 2019 for the annual period ended December 31, 2019. The Company also elected the modified retrospective adoption approach and applied the standard to all contracts open as of January 1, 2019. The Company's quarterly financial statements and disclosure for the first nine months of 2019 reflect the previous accounting standard of FASB Accounting Standards Codification (“ ASC ”) 605, Revenue Recognition , and will not be restated for the adoption of Topic 606. The cumulative impact of the new revenue standard for fiscal year 2019 was recorded in the fourth quarter of 2019 and reflects the adjustment as if the Company adopted the standard as of January 1, 2019. The timing and amount of revenue recognized by the Company did not change upon the adoption of the new standard, however the Company's accounting for route acquisition costs was impacted. ASC 340-40, Other Assets and Deferred Costs - Contracts With Customers (“ASC 340-40”), issued in conjunction with ASU 2014-09, provides updated guidance around accounting for the incremental costs of obtaining a contract with a customer and for the costs incurred to fulfill a contract with a customer. ASC 340-40 states that an entity should amortize contract cost assets “on a systemic basis that is consistent with the transfer to the customer of the good or services to which the asset relates”, which typically corresponds to the period in which revenue will be recognized. The Company chose straight-line amortization of the contracts as it felt that best depicted when revenue would be recognized and when customers are visiting the gaming establishments. When determining the appropriate amortization period under ASC 340-40, the Company evaluated the impact of any renewal clauses that are likely to be exercised. The Company focused on whether commissions paid for renewals were commensurate with commissions paid on the original contract. The Company determined the renewal commissions were not commensurate and the amortization period should include expected renewals. As such, the period over which route and customer acquisition costs are amortized was extended to include expected renewals which resulted in an increase to the average life to 12.4 years. Recent accounting pronouncements : In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases . In July 2018, the FASB also issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements , which provides an optional transition method allowing the standard to be applied at the adoption date. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for the Company's fiscal year beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 , unless the Company disqualifies as an emerging growth company, in which case earlier adoption may be required . A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Property and Equipment Useful Lives | Depreciation has been computed using the straight-line method over the following estimated useful lives: Years Video gaming terminals and equipment 10 Amusement and other equipment 7 Office equipment and furniture 7 Computer equipment and software 3-5 Leasehold improvements 5 Vehicles 5 Buildings and improvements 15-29 Property and equipment consists of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Video game terminals and equipment $ 183,736 $ 166,850 Amusement and other equipment 21,547 16,417 Office equipment and furniture 1,590 1,540 Computer equipment and software 11,469 8,715 Leasehold improvements 1,650 44 Vehicles 10,702 9,304 Buildings and improvements 10,845 12,075 Land 911 911 Construction in progress 606 768 Total property and equipment 243,056 216,624 Less accumulated depreciation and amortization (112,400) (97,423) Property and equipment, net $ 130,656 $ 119,201 |
Schedule of Change in Accounting Estimate | The impact of this change in estimate for the three and nine months ended September 30, 2020, was as follows (in thousands): Three months ended Nine months ended September 30, 2020 September 30, 2020 Decrease to depreciation expense $ 1,872 $ 6,383 Increase to net income/decrease to net loss $ 1,338 $ 4,564 Increase to net income per share/decrease to net loss per share $ 0.02 $ 0.06 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Depreciation has been computed using the straight-line method over the following estimated useful lives: Years Video gaming terminals and equipment 10 Amusement and other equipment 7 Office equipment and furniture 7 Computer equipment and software 3-5 Leasehold improvements 5 Vehicles 5 Buildings and improvements 15-29 Property and equipment consists of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Video game terminals and equipment $ 183,736 $ 166,850 Amusement and other equipment 21,547 16,417 Office equipment and furniture 1,590 1,540 Computer equipment and software 11,469 8,715 Leasehold improvements 1,650 44 Vehicles 10,702 9,304 Buildings and improvements 10,845 12,075 Land 911 911 Construction in progress 606 768 Total property and equipment 243,056 216,624 Less accumulated depreciation and amortization (112,400) (97,423) Property and equipment, net $ 130,656 $ 119,201 |
Route and Customer Acquisitio_2
Route and Customer Acquisition Costs (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Route and Customer Acquisition Costs | Route and customer acquisition costs consist of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Cost $ 28,032 $ 28,501 Accumulated amortization (11,914) (11,102) Route and customer acquisition costs, net $ 16,118 $ 17,399 |
Location Contracts Acquired (Ta
Location Contracts Acquired (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Location Contracts Acquired | Location contracts acquired consist of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, December 31, Cost $ 208,449 $ 204,353 Accumulated amortization (52,917) (37,570) Location contracts acquired, net $ 155,532 $ 166,783 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | The Company’s debt as of September 30, 2020 and December 31, 2019, consisted of the following (in thousands): September 30, December 31, 2019 Senior Secured Credit Facility: Revolving credit facility $ 5,000 $ 58,500 Term Loan 231,000 240,000 Delayed Draw Term Loan (DDTL) 121,125 60,000 Total debt 357,125 358,500 Less: Debt issuance costs (8,118) (8,808) Total debt, net of debt issuance costs 349,007 349,692 Less: Current maturities (18,250) (15,000) Total debt, net of current maturities $ 330,757 $ 334,692 |
Business and Asset Acquisitio_2
Business and Asset Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Schedule of Consideration Payable | Current and long-term portions of consideration payable consist of the following at September 30, 2020 and December 31, 2019 (in thousands): September 30, 2020 December 31, 2019 Current Long-Term Current Long-Term TAV $ 490 $ 3,249 $ 490 $ 3,497 Abraham — — 55 — Fair Share Gaming 1,258 601 1,057 899 Family Amusement 391 2,576 293 2,815 Skyhigh 532 4,272 763 3,948 G3 295 141 2,952 154 Grand River — 5,587 2,304 5,113 IGS 80 — 2,379 — Illinois Operators 300 — — — Tom's Amusements — 1,445 — — Total $ 3,346 $ 17,871 $ 10,293 $ 16,426 |
Business Acquisition, Pro Forma Information | This unaudited pro forma information does not project revenues and net income post acquisition (in thousands). Three months ended Nine months ended September 30, 2019 September 30, 2019 Revenues $ 113,165 $ 345,067 Net (loss) income (720) 9,991 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of Liabilities Measured on a Recurring Basis | The following tables summarize the Company’s liabilities that are measured at fair value on a recurring basis (in thousands): Fair Value Measurement at Reporting Date Using September 30, 2020 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Contingent consideration $ 14,211 $ — $ — $ 14,211 Fair Value Measurement at Reporting Date Using December 31, 2019 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Contingent consideration $ 17,327 $ — $ — $ 17,327 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Components of Basic and Diluted EPS | The components of basic and diluted earning per share (“EPS”) were as follows for the three and nine months ended September 30 (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net (loss) income $ 12,143 $ (1,598) $ (11,097) $ 6,725 Basic weighted average outstanding shares of common stock 82,785 59,684 79,708 58,500 Dilutive effect of stock-based awards for common stock 771 — — 1,113 Dilutive effect of stockholder notes receivable for common stock — — — 927 Dilutive effect of warrants for common stock — — — 1,474 Dilutive effect of contingently convertible A-2 shares for common stock 3,403 — 0 0 Diluted weighted average outstanding shares of common stock 86,960 59,684 79,708 62,013 Earnings (loss) per share: Basic $ 0.15 $ (0.03) $ (0.14) $ 0.11 Diluted $ 0.14 $ (0.03) $ (0.14) $ 0.11 |
Description of Business (Detail
Description of Business (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($)terminallocation | Sep. 30, 2019USD ($)terminallocation | Sep. 30, 2020USD ($)dayterminallocation | Sep. 30, 2019USD ($)terminallocation | |
Unusual or Infrequent Item, or Both [Line Items] | ||||
Number of video gaming terminals | terminal | 11,597 | 10,346 | 11,597 | 10,346 |
Number of video gaming locations | location | 2,363 | 2,290 | 2,363 | 2,290 |
Number of days video gaming terminals inoperable | day | 106 | |||
Number of video gaming days in quarter | day | 274 | |||
Percent of days inoperable during quarter | 39.00% | |||
Percent of employees furloughed | 90.00% | |||
Cash payment for asset acquisition | $ 17,656 | $ 19,878 | ||
Other operating expenses | $ 1,383 | $ 6,200 | 5,719 | $ 7,546 |
COVID-19 | ||||
Unusual or Infrequent Item, or Both [Line Items] | ||||
Other nonrecurring expense | 200 | 2,100 | ||
Cash payment for asset acquisition | 1,900 | |||
Other operating expenses | $ 400 | $ 700 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Adopted accounting pronouncements (Details) | Jan. 01, 2019 |
Accounting Standards Update 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Average life of contract | 12 years 4 months 24 days |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Change in estimate (Details) - Service Life - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | |
Change in Accounting Estimate [Line Items] | ||||
Decrease to depreciation expense | $ 1,872 | $ 6,383 | ||
Increase to net income/decrease to net loss | $ 1,338 | $ 4,564 | ||
Increase to income per share/decrease to loss per share (in usd per share) | $ 0.02 | $ 0.06 | ||
Video gaming terminals and equipment | ||||
Change in Accounting Estimate [Line Items] | ||||
Useful life | 10 years | 7 years | 10 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of property and equipment useful lives (Details) | 9 Months Ended |
Sep. 30, 2020 | |
Amusement and other equipment | |
Property, Plant and Equipment [Line Items] | |
Useful life | 7 years |
Office equipment and furniture | |
Property, Plant and Equipment [Line Items] | |
Useful life | 7 years |
Computer equipment and software | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 3 years |
Computer equipment and software | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Vehicles | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Buildings and improvements | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 15 years |
Buildings and improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 29 years |
Investment in Convertible Not_2
Investment in Convertible Notes (Details) - USD ($) | Oct. 11, 2019 | Jul. 19, 2019 | Jul. 30, 2020 |
Debt Securities, Available-for-sale [Line Items] | |||
Monthly installment receivable | $ 1,000,000 | ||
Convertible Promissory Notes | |||
Debt Securities, Available-for-sale [Line Items] | |||
Investment purchase | $ 25,000,000 | $ 30,000,000 | $ 25,000,000 |
Investment interest rate | 3.00% | ||
Convertible Promissory Notes | Subordinated Debt [Member] | |||
Debt Securities, Available-for-sale [Line Items] | |||
Investment purchase | $ 5,000,000 | $ 5,000,000 | |
Investment maturity | 6 months |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 243,056 | $ 243,056 | $ 216,624 | ||
Less accumulated depreciation and amortization | (112,400) | (112,400) | (97,423) | ||
Property and equipment, net | 130,656 | 130,656 | 119,201 | ||
Depreciation and amortization of property and equipment | 5,361 | $ 6,524 | 15,299 | $ 18,665 | |
Video gaming terminals and equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 183,736 | 183,736 | 166,850 | ||
Amusement and other equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 21,547 | 21,547 | 16,417 | ||
Office equipment and furniture | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 1,590 | 1,590 | 1,540 | ||
Computer equipment and software | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 11,469 | 11,469 | 8,715 | ||
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 1,650 | 1,650 | 44 | ||
Vehicles | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 10,702 | 10,702 | 9,304 | ||
Buildings and improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 10,845 | 10,845 | 12,075 | ||
Land | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | 911 | 911 | 911 | ||
Construction in Progress | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment, gross | $ 606 | $ 606 | $ 768 |
Route and Customer Acquisitio_3
Route and Customer Acquisition Costs - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Capitalized Contract Cost [Line Items] | |||||
Gross payments due | $ 6,600 | $ 6,600 | $ 7,400 | ||
Net present value of payments due | 5,800 | 5,800 | 6,500 | ||
Current portion of payments due | 1,646 | 1,646 | 1,700 | ||
Customer acquisition cost asset | 18,300 | 18,300 | 18,700 | ||
Capitalized contract cost, subject to claw back | 1,800 | 1,800 | $ 2,200 | ||
Amortization expense (decrease in expense) on route and customer acquisition costs | $ 500 | $ 700 | $ 1,400 | $ 2,000 |
Route and Customer Acquisitio_4
Route and Customer Acquisition Costs - Schedule of Customer Contract Acquired (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Revenue from Contract with Customer [Abstract] | ||
Cost | $ 28,032 | $ 28,501 |
Accumulated amortization | (11,914) | (11,102) |
Route and customer acquisition costs, net | $ 16,118 | $ 17,399 |
Location Contracts Acquired - S
Location Contracts Acquired - Schedule of Customer Contract Acquired (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Cost | $ 208,449 | $ 204,353 |
Accumulated amortization | (52,917) | (37,570) |
Location contracts acquired, net | $ 155,532 | $ 166,783 |
Location Contracts Acquired - N
Location Contracts Acquired - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Location Contract | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of intangible assets | $ 5.2 | $ 3.6 | $ 15.4 | $ 11.2 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Goodwill [Line Items] | ||
Goodwill | $ 34,511 | $ 34,511 |
Tax exempt portion of goodwill | 28,700 | |
Grand River | ||
Goodwill [Line Items] | ||
Goodwill | $ 34,500 |
Debt - Schedule of Long-term De
Debt - Schedule of Long-term Debt Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Mar. 01, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | |||
Total debt | $ 357,125 | $ 358,500 | |
Less: Debt issuance costs | (8,118) | (8,808) | |
Total debt, net of debt issuance costs | 349,007 | 349,692 | |
Less: Current maturities | (18,250) | (15,000) | |
Total debt, net of current maturities | 330,757 | 334,692 | |
New Credit Facility | Revolving credit facility | |||
Debt Instrument [Line Items] | |||
Total debt | 5,000 | 58,500 | |
New Credit Facility | Term Loan | |||
Debt Instrument [Line Items] | |||
Total debt | 231,000 | 240,000 | |
New Credit Facility | Delayed Draw Term Loan (DDTL) | |||
Debt Instrument [Line Items] | |||
Total debt | $ 121,125 | $ 65,000 | $ 60,000 |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) | 9 Months Ended | |||
Sep. 30, 2020 | Mar. 01, 2020 | Dec. 31, 2019 | Nov. 13, 2019 | |
Debt Instrument [Line Items] | ||||
Long term debt, gross | $ 357,125,000 | $ 358,500,000 | ||
New Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Remaining availability | $ 95,000,000 | |||
Ratio of consolidated net debt to EBITDA (no greater than) | 4.50 | |||
Ratio of consolidated EBITDA to fixed charges (no less than) | 1.20 | |||
Unamortized debt issuance costs | $ 8,100,000 | 8,800,000 | ||
New Credit Facility | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 2.25% | |||
New Credit Facility | Alternative Base Rate | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 1.25% | |||
New Credit Facility | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 100,000,000 | |||
Long term debt, gross | $ 5,000,000 | 58,500,000 | ||
Weighted-average interest rate | 3.20% | |||
New Credit Facility | Revolving Credit Facility | Federal Funds Effective Rate | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate | 0.50% | |||
New Credit Facility | Revolving Credit Facility | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Debt instrument basis spread on variable rate, minimum percent | 0.50% | |||
Basis spread on variable rate | 1.00% | |||
New Credit Facility | Letter of Credit | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | 10,000,000 | |||
New Credit Facility | Swing Line Facility | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | 10,000,000 | |||
New Credit Facility | Term Loan | ||||
Debt Instrument [Line Items] | ||||
Face amount | 240,000,000 | |||
Long term debt, gross | $ 231,000,000 | 240,000,000 | ||
Additional term loan repayment rate | 5.00% | |||
New Credit Facility | Additional Term Loan Facility | ||||
Debt Instrument [Line Items] | ||||
Face amount | $ 125,000,000 | |||
New Credit Facility | Delayed Draw Term Loan (DDTL) | ||||
Debt Instrument [Line Items] | ||||
Long term debt, gross | $ 121,125,000 | $ 65,000,000 | 60,000,000 | |
Prior Credit Facility | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Long term debt, gross | 85,000,000 | |||
Prior Credit Facility | Swing Line Facility | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | 5,000,000 | |||
Prior Credit Facility | Additional Term Loan Facility | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | 125,000,000 | |||
Prior Credit Facility | Contract draw loan | ||||
Debt Instrument [Line Items] | ||||
Maximum borrowing capacity | $ 170,000,000 | |||
New Credit Facility Amendment | ||||
Debt Instrument [Line Items] | ||||
Fees associated with amendment of credit agreement | 400,000 | |||
Unamortized debt issuance costs | $ 300,000 | |||
New Credit Facility Amendment | LIBOR | ||||
Debt Instrument [Line Items] | ||||
Debt instrument basis spread on variable rate, minimum percent | 0.50% | |||
New Credit Facility Amendment | Alternative Base Rate | ||||
Debt Instrument [Line Items] | ||||
Debt instrument basis spread on variable rate, minimum percent | 1.50% |
Business and Asset Acquisitio_3
Business and Asset Acquisitions - Narrative (Details) $ in Thousands | Sep. 23, 2020USD ($) | Aug. 06, 2020USD ($)location | Jul. 22, 2020USD ($) | Sep. 16, 2019USD ($)terminalinstallment_paymentlocation | Sep. 30, 2019USD ($)locationterminal | Sep. 30, 2020USD ($)terminallocation | Sep. 30, 2019USD ($)locationterminal | Sep. 23, 2019USD ($)terminallocation |
Business Acquisition [Line Items] | ||||||||
Cash purchase price | $ 5,611 | $ 100,896 | ||||||
Number of video gaming locations | location | 2,290 | 2,363 | 2,290 | |||||
Pro forma revenue of acquiree | $ 113,165 | $ 345,067 | ||||||
Proforma earnings of acquiree | $ (720) | $ 9,991 | ||||||
Number of video gaming terminals | terminal | 10,346 | 11,597 | 10,346 | |||||
Illinois Operators Inc | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of video gaming locations | location | 13 | |||||||
Asset Acquisition, Consideration Transferred | $ 4,000 | |||||||
Cash payment for asset acquisition | 3,700 | |||||||
Asset acquisition, deferred payments | 300 | |||||||
Video game terminals and equipment acquired | 600 | |||||||
Location contracts acquired | $ 3,400 | |||||||
IGS | ||||||||
Business Acquisition [Line Items] | ||||||||
Number of video gaming locations | location | 29 | |||||||
Cash payment for asset acquisition | $ 2,400 | |||||||
Asset acquisition, deferred payments | $ 2,300 | |||||||
Video game terminals and equipment acquired | 1,700 | |||||||
Location contracts acquired | $ 3,000 | |||||||
Number of video gaming terminals | terminal | 139 | |||||||
Notes payable, interest rate | 5.00% | |||||||
Tom's Amusements | ||||||||
Business Acquisition [Line Items] | ||||||||
Consideration transferred | $ 3,600 | |||||||
Cash purchase price | 2,100 | |||||||
Contingent consideration | $ 1,500 | $ 1,400 | ||||||
Contingent consideration, first installment term | 18 months | |||||||
Contingent consideration, second installment term | 24 months | |||||||
Contingent consideration, installment amount | $ 750 | |||||||
Video game terminals and equipment acquired | 1,600 | |||||||
Location contracts acquired | 800 | |||||||
Indefinite-lived intangible assets acquired | 1,000 | |||||||
Business combination, cash acquired | $ 200 | |||||||
Grand River | ||||||||
Business Acquisition [Line Items] | ||||||||
Consideration transferred | $ 113,700 | |||||||
Number of video gaming locations | location | 450 | |||||||
Pro forma revenue of acquiree | $ 26,700 | |||||||
Proforma earnings of acquiree | $ 1,800 | |||||||
Number of video gaming terminals | terminal | 2,009 | |||||||
Cash payment made to acquire business, before working capital adjustment | $ 100,000 | |||||||
Payment to acquire business, working capital adjustment | 6,600 | |||||||
Contingent consideration | $ 7,100 | |||||||
Number of installment payments | installment_payment | 2 | |||||||
Grand River | Contingent Consideration, Installment One | ||||||||
Business Acquisition [Line Items] | ||||||||
Contingent consideration, maximum installment to be paid | $ 2,500 | |||||||
Contingent consideration arrangement reversed | $ 2,500 | |||||||
Grand River | Contingent Consideration, Installment Two | ||||||||
Business Acquisition [Line Items] | ||||||||
Contingent consideration, maximum installment to be paid | $ 7,000 |
Business and Asset Acquisitio_4
Business and Asset Acquisitions - Schedule of Unaudited Pro Forma Results (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Business Combinations [Abstract] | ||
Revenues | $ 113,165 | $ 345,067 |
Net (loss) income | $ (720) | $ 9,991 |
Business and Asset Acquisitio_5
Business and Asset Acquisitions - Schedule of Consideration Payable (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Business Acquisition [Line Items] | ||
Current | $ 3,346 | $ 10,293 |
Long-Term | 17,871 | 16,426 |
TAV | ||
Business Acquisition [Line Items] | ||
Current | 490 | 490 |
Long-Term | 3,249 | 3,497 |
Abraham | ||
Business Acquisition [Line Items] | ||
Current | 0 | 55 |
Long-Term | 0 | 0 |
Fair Share Gaming | ||
Business Acquisition [Line Items] | ||
Current | 1,258 | 1,057 |
Long-Term | 601 | 899 |
Family Amusement | ||
Business Acquisition [Line Items] | ||
Current | 391 | 293 |
Long-Term | 2,576 | 2,815 |
Skyhigh | ||
Business Acquisition [Line Items] | ||
Current | 532 | 763 |
Long-Term | 4,272 | 3,948 |
G3 | ||
Business Acquisition [Line Items] | ||
Current | 295 | 2,952 |
Long-Term | 141 | 154 |
Grand River | ||
Business Acquisition [Line Items] | ||
Current | 0 | 2,304 |
Long-Term | 5,587 | 5,113 |
IGS | ||
Business Acquisition [Line Items] | ||
Current | 80 | 2,379 |
Long-Term | 0 | 0 |
Illinois Operators | ||
Business Acquisition [Line Items] | ||
Current | 300 | 0 |
Long-Term | 0 | 0 |
Tom's Amusements | ||
Business Acquisition [Line Items] | ||
Current | 0 | 0 |
Long-Term | $ 1,445 | $ 0 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Fair Value Measurements, Liabilities Measured on a Recurring Basis (Details) - Fair Value, Recurring - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | $ 14,211 | $ 17,327 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0 | 0 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | 0 | 0 |
Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | $ 14,211 | $ 17,327 |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Fair Value Disclosures [Abstract] | |
Decrease in other expenses due to one percent increase in discount rate | $ 0.2 |
Increase in other expenses due to one percent decrease in discount rate | $ 0.2 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | Sep. 28, 2020USD ($)$ / sharesshares | Aug. 14, 2020shares | Jul. 14, 2020shares | Nov. 20, 2019$ / sharesshares | Sep. 30, 2020$ / sharesshares | Jan. 14, 2020shares | Dec. 31, 2019$ / sharesshares | Nov. 19, 2019USD ($)$ / sharesshares | Sep. 30, 2019shares | Dec. 31, 2017$ / sharesshares | Jan. 31, 2013$ / sharesshares |
Class of Warrant or Right [Line Items] | |||||||||||
Common stock, par value (in usd per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||
Preferred stock, authorized (in shares) | 1,000,000 | 1,000,000 | |||||||||
Sale of stock (in usd per share) | $ / shares | $ 10.50 | ||||||||||
Total offering size | $ | $ 84,000,000 | ||||||||||
Sale of stock, consideration received on transaction | $ | $ 78,700,000 | ||||||||||
Warrants issued and outstanding (in shares) | 0 | 15,750 | |||||||||
Warrants issued (in shares) | 7,333,326 | 15,000,000 | 253,575 | ||||||||
Warrants canceled and reissued to prior shareholders (in shares) | 2,444,437 | ||||||||||
Term of warrants | 5 years | 5 years | |||||||||
Warrant, exercise price (in usd per share) | $ / shares | $ 11.50 | $ 11.50 | $ 17.80 | ||||||||
Warrants, subject to adjustments after consummation of reverse capitalization period | 30 days | ||||||||||
Exercise conversion rate of warrants (share per share) | 0.250 | ||||||||||
Warrants tendered (in shares) | 7,189,990 | ||||||||||
Percent of warrants outstanding | 99.93% | ||||||||||
Public Stock Offering | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Common stock, shares issued (in shares) | 8,000,000 | ||||||||||
Offering costs | $ | $ 5,300,000 | ||||||||||
Over-Allotment Option | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Common stock, shares issued (in shares) | 1,200,000 | ||||||||||
Tranche I - EBITDA for last 12 months or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Maximum EBITDA before stock conversion | $ | $ 132,000,000 | ||||||||||
Tranche II - LTM EBITDA or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Maximum EBITDA before stock conversion | $ | 152,000,000 | ||||||||||
Tranche III - LTM EBITDA or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Maximum EBITDA before stock conversion | $ | $ 172,000,000 | ||||||||||
Class A-1 Common Stock | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Common stock, par value (in usd per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||
Common stock, shares authorized (in shares) | 250,000,000 | 250,000,000 | |||||||||
Common stock, shares issued (in shares) | 92,146,013 | 76,637,470 | |||||||||
Conversion of stock, shares converted (in shares) | 3,784,416 | ||||||||||
Exercise of warrants (in shares) | 1,797,474 | ||||||||||
Class A-1 Common Stock | Tranche I - EBITDA for last 12 months or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Maximum stock price of common stock before conversion (in usd per share) | $ / shares | $ 12 | ||||||||||
Class A-1 Common Stock | Tranche II - LTM EBITDA or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Maximum stock price of common stock before conversion (in usd per share) | $ / shares | 14 | ||||||||||
Class A-1 Common Stock | Tranche III - LTM EBITDA or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Maximum stock price of common stock before conversion (in usd per share) | $ / shares | $ 16 | ||||||||||
Class A-2 Common Stock | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Common stock, par value (in usd per share) | $ / shares | $ 0.0001 | $ 0.0001 | |||||||||
Common stock, shares authorized (in shares) | 10,000,000 | 10,000,000 | |||||||||
Common stock, shares issued (in shares) | 3,403,363 | 4,999,999 | 5,000,000 | ||||||||
Percentage of ownership requiring exchange (less than) | 4.99% | ||||||||||
Class A-2 Common Stock | Tranche I - EBITDA for last 12 months or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Number of shares to be exchanged (in shares) | 1,666,666 | ||||||||||
Class A-2 Common Stock | Tranche II - LTM EBITDA or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Number of shares to be exchanged (in shares) | 1,666,667 | ||||||||||
Class A-2 Common Stock | Tranche III - LTM EBITDA or 20 trading days in consecutive 30 day trading period | |||||||||||
Class of Warrant or Right [Line Items] | |||||||||||
Number of shares to be exchanged (in shares) | 1,666,667 | ||||||||||
Number of shares converted (in shares) | 1,596,636 |
Stock-based Compensation (Detai
Stock-based Compensation (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Jan. 31, 2020 | Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock option compensation expense | $ 1.7 | $ 0.1 | $ 4.1 | $ 0.4 | ||
RSU | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Restricted stock units granted (in shares) | 1,700,000 | |||||
Estimated grant date fair value of options and RSUs granted | $ 25.1 | |||||
RSU | Employee | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting period | 5 years | |||||
RSU | Minimum | Director | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting period | 6 months | |||||
RSU | Maximum | Director | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting period | 1 year | |||||
Options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Award termination period | 10 years | |||||
Purchase price of common stock as a percent | 100.00% | |||||
Class A-1 Common Stock | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Options granted (in shares) | 200,000 | 1,200,000 | ||||
Vesting period | 4 years | 5 years | ||||
Class A-1 Common Stock | Options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Class A1 common stock authorized (in shares) | 6,000,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Contingency [Line Items] | ||||
Income tax expense (benefit) | $ (6,593) | $ (699) | $ (11,788) | $ 2,750 |
Effective tax rate | (118.80%) | 30.40% | 51.50% | 29.00% |
Employee and Officer Compensation | ||||
Income Tax Contingency [Line Items] | ||||
Income tax expense (benefit) | $ (8,000) | $ (8,000) |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Jul. 02, 2019USD ($) | Sep. 30, 2020defendent |
Loss Contingencies [Line Items] | ||
Number of defendant establishments | defendent | 10 | |
Illinois Gaming Investors, LLC vs. The Company | ||
Loss Contingencies [Line Items] | ||
Damages sought | $ | $ 10,000,000 |
Related-Party Transactions (Det
Related-Party Transactions (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | |||
Payments on consideration payable | $ 4,650,000 | $ 2,091,000 | |
Percent of total underwriting fees | 4.50% | ||
Raine Group | |||
Related Party Transaction [Line Items] | |||
Payment for underwriting expense | $ 200,000 | ||
Percent of total underwriting fees paid | 5.50% | ||
Consideration Payable to Previous Sellers in Business Acquisitions | Fair Share Seller | Director | |||
Related Party Transaction [Line Items] | |||
Contingent consideration | $ 1,900,000 | $ 2,000,000 | |
Payments on consideration payable | 600,000 | ||
Consideration Payable to Previous Sellers in Business Acquisitions | G3 Seller | Employee | |||
Related Party Transaction [Line Items] | |||
Contingent consideration | 400,000 | $ 3,100,000 | |
Payments on consideration payable | 2,500,000 | 400,000 | |
Legal Fees for General Legal and Business Matters | Much Shelist | Affiliated Entity | |||
Related Party Transaction [Line Items] | |||
Legal fees | $ 100,000 | $ 400,000 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||
Earnings Per Share [Abstract] | |||||||||
Net (loss) income | $ 12,143 | $ (21,274) | $ (1,966) | $ (1,598) | $ 4,328 | $ 3,995 | $ (11,097) | $ 6,725 | |
Basic weighted average outstanding shares of common stock (in shares) | [1] | 82,785,000 | 59,684,000 | 79,708,000 | 58,500,000 | ||||
Dilutive effect of stock-based awards for common stock (in shares) | 771,000 | 0 | 0 | 1,113,000 | |||||
Dilutive effect of stockholder notes receivable for common stock (in shares) | 0 | 0 | 0 | 927,000 | |||||
Dilutive effect of warrants for common stock (in shares) | 0 | 0 | 0 | 1,474,000 | |||||
Dilutive effect of contingently convertible A-2 shares for common stock (in shares) | 3,403,000 | 0 | 0 | 0 | |||||
Diluted weighted average outstanding shares of common stock (in shares) | [1] | 86,960,000 | 59,684,000 | 79,708,000 | 62,013,000 | ||||
Earnings per share - basic (in usd per share) | [1] | $ 0.15 | $ (0.03) | $ (0.14) | $ 0.11 | ||||
Earnings per share - diluted (in usd per share) | [1] | $ 0.14 | $ (0.03) | $ (0.14) | $ 0.11 | ||||
Anti-dilutive options excluded from calculation of diluted EPS (in shares) | 864,848 | 5,465,710 | |||||||
[1] | Per share and share amounts for 2019 have been retroactively restated to give effect to the reverse recapitalization that is discussed in Note 1. |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Sep. 28, 2020 | Oct. 31, 2020 |
Subsequent Event [Line Items] | ||
Sale of stock (in usd per share) | $ 10.50 | |
Sale of stock, consideration received on transaction | $ 78.7 | |
Over-Allotment Option | ||
Subsequent Event [Line Items] | ||
Common stock, shares issued (in shares) | 1,200,000 | |
Subsequent Event | Class A-1 Common Stock | Over-Allotment Option | ||
Subsequent Event [Line Items] | ||
Common stock, shares issued (in shares) | 1,133,015 | |
Sale of stock (in usd per share) | $ 10.50 | |
Sale of stock, consideration received on transaction | $ 11.3 |