ACCEL ENTERTAINMENT, INC. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, those discussed in "Risk Factors" in this Quarterly Report on Form 10-Q, and those discussed in the section titled "Risk Factors" included in our Annual Report on Form 10-K for the year endedDecember 31, 2022 . This discussion and analysis should also be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations", set forth in our Annual Report on Form 10-K for the year endedDecember 31, 2022 .
Company Overview
We believe we are a leading distributed gaming operator inthe United States on an Adjusted EBITDA basis, and a preferred partner for local business owners in the markets we serve. Our business consists of the installation, maintenance and operation of gaming terminals, redemption devices that disburse winnings and contain automated teller machine ("ATM") functionality, and other amusement devices in authorized non-casino locations such as restaurants, bars, taverns, convenience stores, liquor stores, truck stops, and grocery stores. We also operate stand-alone ATMs in gaming and non-gaming locations. We currently operate as a distributed gaming operator in the following states:
•Illinois - we have been a licensed terminal operator by the Illinois Gaming Board ("IGB") since 2012,
•Montana - we were granted a manufacturer, distributor and route operator
license in
•Nevada - we were granted a two-year terminal operator license in
•Georgia - we received approval from the
•Iowa - we are registered with the
•Nebraska - we became a licensed distributor of mechanical amusement devices in
•Pennsylvania - we have held a license from the
Through our wholly owned subsidiary, Grand Vision Gaming, we are also a
manufacturer of gaming terminals in the
We are also subject to various other federal, state and local laws and regulations in addition to gaming regulations.
Century Acquisition
OnJune 1, 2022 , we completed our previously announced acquisition of all of the outstanding equity interests ofCentury Gaming, Inc. , aMontana corporation. The aggregate purchase consideration was$164.3 million , which included: (i) a cash payment made at closing of$45.5 million to the equity holders of Century; (ii) repayment of$113.2 million of Century's indebtedness; and (iii) 515,622 shares of our Class A-1 common stock issued to certain members of Century's management with a fair value of$5.6 million on the acquisition date. The cash payments were financed using cash from a draw of approximately$160 million from our revolving credit facility and delayed draw term loan facility under our senior secured credit facility. Our financial results for the three months endedMarch 31, 2023 includes the results of Century. 24
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Macroeconomic Factors
Ongoing interest rate increases, persistent inflation and actual or perceived instability in theU.S. and global banking systems may increase the risk of an economic recession and volatility and dislocation in the capital or credit markets inthe United States and other markets globally. Our location partners may be adversely impacted by changes in overall economic and financial conditions, and certain location partners may cease operations in the event of a recession or inability to access financing. Furthermore, our revenue is largely driven by players' disposable incomes and level of gaming activity, and economic conditions that adversely impact players' ability and desire to spend disposable income at our locations partners may adversely affect our results of operations and cash flows. To date, we have not observed material impacts in our business or outlook, but there can be no assurance that, in the event of a recession, levels of gaming activity would not be adversely affected. Further, as described in more detail below, we have observed certain increases in our costs, particularly higher wages and increased fuel costs, as well as increased interest expense on our debt. In addition, during the first quarter of 2023, we accelerated certain of our capital expenditures related to gaming machine components to manage our supply chain. We intend to continue to monitor macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions to the extent our business begins to be adversely impacted.
Components of Performance
Revenues
Net gaming. Net gaming revenue represents net cash received from gaming activities, which is the difference between gaming wins and losses. Net gaming revenue includes the amounts earned by our location partners and is recognized at the time of gaming play.
Amusement. Amusement revenue represents amounts collected from amusement devices operated at various location partners and is recognized at the point the amusement device is used.
Manufacturing. Manufacturing revenue represents sales of gaming terminals by Grand Vision Gaming, a wholly owned subsidiary of Century, which is a designer and manufacturer of gaming terminals and related equipment. ATM fees and other revenue. ATM fees and other revenue represents fees charged for the withdrawal of funds from our redemption devices and stand-alone ATMs and is recognized at the time of the ATM transaction.
Operating Expenses
Cost of revenue. Cost of revenue consists of (i) taxes on net gaming revenue
that is payable to the appropriate jurisdiction, (ii) licenses, permits and
other fees required for the operation of gaming terminals and other equipment,
(iii) location revenue share, which is governed by local governing bodies and
location contracts, (iv) ATM and amusement commissions payable to locations, (v)
ATM and amusement fees, and (vi) costs associated with the sale of gaming
terminals.
General and administrative. General and administrative expenses consist of
operating expense and general and administrative ("G&A") expense. Operating
expense includes payroll and related expense for service technicians, route
technicians, route security, and preventative maintenance personnel. Operating
expense also includes vehicle fuel and maintenance, and non-capitalizable parts
expenses. Operating expenses are generally proportionate to the number of
locations and gaming terminals. G&A expense includes payroll and related expense
for account managers, business development managers, marketing, and other
corporate personnel. In addition, G&A expense also includes marketing,
information technology, insurance, rent and professional fees.
Depreciation and amortization of property and equipment. Depreciation is
computed using the straight-line method over the estimated useful lives of the
individual assets. Leasehold improvements are amortized over the shorter of the
useful life or the lease.
Amortization of intangible assets and route and customer acquisition costs.
Route and customer acquisition costs consist of fees paid at the inception of
contracts entered into with third parties and the gaming locations in the states
we serve, which
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allows us to install and operate gaming terminals. The route and customer acquisition costs and route and customer acquisition costs payable are recorded at the net present value of the future payments using a discount rate equal to our incremental borrowing rate associated with its long-term debt. Route and customer acquisition costs are amortized on a straight-line basis over 18 years, which is the expected estimated life of the contract, including expected renewals.
Location contracts acquired in a business combination are recorded at fair value and then amortized as an intangible asset on a straight-line basis over the expected useful life of 15 years.
Other intangible assets acquired in a business acquisition are recorded at fair value and then amortized as an intangible asset on a straight-line basis over their estimated 7 to 20-year useful lives.
Interest expense, net
Interest expense, net consists of interest on our current credit facilities, amortization of financing fees, accretion of interest on route and customer acquisition costs payable, and interest (income) expense on the interest rate caplets. Interest on the current credit facility is payable monthly on unpaid balances at the variable per annum LIBOR rate plus an applicable margin, as defined under the terms of the credit facility, ranging from 1.75% to 2.75% depending on the first lien net leverage ratio.
Income tax expense
Income tax expense consists mainly of taxes payable to federal, state and local
authorities. Deferred income taxes are recognized for the tax consequences of
temporary differences between the financial statement carrying amounts and the
tax basis of the assets and liabilities.
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Results of Operations
The following table summarizes our results of operations on a consolidated basis
for the three months ended
Three Months Ended
(in thousands, except %'s) March 31 , Increase / (Decrease)
2023 2022 Change ($) Change (%)
Revenues:
Net gaming $ 279,380 $ 188,462 90,918 48.2 %
Amusement 6,798 4,990 1,808 36.2 %
Manufacturing 2,122 - 2,122 N/A
ATM fees and other revenue 4,908 3,439 1,469 42.7 %
Total net revenues 293,208 196,891 96,317 48.9 %
Operating expenses:
Cost of revenue (exclusive of
depreciation and amortization expense
shown below) 204,962 132,620 72,342 54.5 % General and administrative 43,018 31,119 11,899 38.2 %
Depreciation and amortization of
property and equipment 9,063 5,841 3,222 55.2 %
Amortization of intangible assets and
route and customer acquisition costs 5,242 3,548 1,694 47.7 % Other expenses, net 3,251 2,556 695 27.2 % Total operating expenses 265,536 175,684 89,852 51.1 % Operating income 27,672 21,207 6,465 30.5 % Interest expense, net 7,888 4,001 3,887 97.2 %
Loss (gain) on change in fair value
of contingent earnout shares 4,602 (3,417)
8,019 234.7 %
Income before income tax expense 15,182 20,623 (5,441) (26.4) % Income tax expense 6,000 4,835 1,165 24.1 % Net income$ 9,182 $ 15,788 $ (6,606) (41.8) % ` 27
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Revenues
Total revenues for the three months endedMarch 31, 2023 were$293.2 million , an increase of$96.3 million , or 48.9%, compared to the prior-year period. This increase was driven by higher net gaming revenue of$90.9 million , or 48.2%, and manufacturing revenue of$2.1 million . Higher net gaming revenue for the three months endedMarch 31, 2023 was attributable to an increase in gaming terminals and locations due primarily to the acquisition of Century. Net revenues by state are presented below (in thousands): Three Months Ended March 31, 2023 2022 Net revenues by state: Illinois$ 219,843 $ 194,859 Montana 36,451 - Nevada 29,961 - All other 6,953 2,032 Total net revenues$ 293,208 $ 196,891 Cost of revenue
Cost of revenue for the three months ended
General and administrative
General and administrative expenses for the three months ended
Depreciation and amortization of property and equipment
Depreciation and amortization of property and equipment for the three months endedMarch 31, 2023 was$9.1 million , an increase of$3.2 million , or 55.2%, compared to the prior-year period due to an increased number of locations and gaming terminals primarily attributable to the acquisition of Century.
Amortization of intangible assets and route and customer acquisition costs
Amortization of intangible assets and route and customer acquisition costs for the three months endedMarch 31, 2023 was$5.2 million , an increase of$1.7 million , or 47.7%, compared to the prior-year period due to an increase in location contracts acquired and amortization expense on other intangible assets acquired with Century. Other expenses, net Other expenses, net for the three months endedMarch 31, 2023 were$3.3 million , an increase of$0.7 million , or 27.2%, compared to the prior-year period due to higher fair value adjustments associated with the revaluation of contingent consideration liabilities and higher non-recurring costs on acquisition-related matters, partially offset by a$1.0 million loss associated with a legal settlement that was recorded in the prior year.
Interest expense, net
Interest expense, net for the three months ended
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Loss (gain) on change in fair value of contingent earnout shares
Loss on the change in fair value of contingent earnout shares for the three months endedMarch 31, 2023 was$4.6 million , compared to the prior-year period, which had a gain of$3.4 million . The changes in fair value are primarily due to the change in the market value of our A-1 common stock, which was the primary input to the valuation of the contingent earnout shares.
Income tax expense
Income tax expense for the three months endedMarch 31, 2023 was$6.0 million , an increase of$1.2 million , or 24.1%, compared to the prior-year period. The effective tax rate for the three months endedMarch 31, 2023 was 39.5% compared to 23.4% in the prior year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and was the primary driver for the fluctuations in the tax rate year over year.
Key Business Metrics
We use statistical data and comparative information commonly used in the gaming industry to monitor the performance of the business, none of which are prepared in accordance withU.S. GAAP, and therefore should not be viewed as indicators of operational performance. Our management uses these key business metrics for financial planning, strategic planning and employee compensation decisions. The key business metrics include:
•Number of locations and;
•Number of gaming terminals
We also periodically review and revise our key business metrics to reflect changes in our business.
Number of locations
The number of locations is based on a combination of third-party portal data and
data from our internal systems. We utilize this metric to continually monitor
growth from existing locations, organic openings, purchased locations, and
competitor conversions. Competitor conversions occur when a location chooses to
change terminal operators.
The following table sets forth information with respect to our primary
locations:
As of March 31, Increase / (Decrease)
2023 2022 Change Change %
Illinois 2,663 2,565 64 2.5 %
Montana 620 - 620 N/A
Nevada 345 - 345 N/A
Total locations 3,628 2,565 1,063 41.4 %
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Number of gaming terminals
The number of gaming terminals in operation is based on a combination of third-party portal data and data from our internal systems. We utilize this metric to continually monitor growth from existing locations, organic openings, purchased locations, and competitor conversions.
The following table sets forth information with respect to the number of gaming terminals in the primary locations:
As of March 31, Increase / (Decrease)
2023 2022 Change Change %
Illinois 14,546 13,663 758 5.6 %
Montana 6,247 - 6,247 N/A
Nevada 2,704 - 2,704 N/A
Total gaming terminals 23,497 13,663 9,834 72.0 %
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted net income are non-GAAP financial measures and are
key metrics used to monitor ongoing core operations. Our management believes
Adjusted EBITDA and Adjusted net income enhance the understanding of our
underlying drivers of profitability and trends in our business and
facilitate company-to-company and period-to-period comparisons, because
these non-GAAP financial measures exclude the effects of certain non-cash items
or represent certain nonrecurring items that are unrelated to core performance.
Management also believes that these non-GAAP financial measures are used by
investors, analysts and other interested parties as measures of financial
performance and to evaluate our ability to fund capital expenditures, service
debt obligations and meet working capital requirements.
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Adjusted net income and Adjusted EBITDA
Three Months Ended
(in thousands) March 31,
2023 2022
Net income $ 9,182 $ 15,788
Adjustments:
Amortization of intangible assets and route and customer
acquisition costs(1) 5,242 3,548
Stock-based compensation (2) 1,688 1,605
Loss (gain) on change in fair value of contingent earnout
shares (3) 4,602 (3,417)
Other expenses, net (4) 3,251 2,556
Tax effect of adjustments (5) (2,901) (2,475)
Adjusted net income 21,064 17,605
Depreciation and amortization of property and equipment 9,063 5,841
Interest expense, net 7,888 4,001
Emerging markets (6) (798) 485
Income tax expense 8,901 7,310
Adjusted EBITDA $ 46,118 $ 35,242
(1)Amortization of intangible assets and route and customer acquisition costs
consist of upfront cash payments and future cash payments to third-party sales
agents to acquire the location partners that are not connected with a business
acquisition, as well as the amortization of other intangible assets. We amortize
the upfront cash payment over the life of the contract, including expected
renewals, beginning on the date the location goes live, and recognize non-cash
amortization charges with respect to such items. Future or deferred cash
payments, which may occur based on terms of the underlying contract, are
generally lower in the aggregate as compared to established practice of
providing higher upfront payments, and are also capitalized and amortized over
the remaining life of the contract. Future cash payments do not include cash
costs associated with renewing customer contracts as we do not generally incur
significant costs as a result of extension or renewal of an existing contract.
Location contracts acquired in a business combination are recorded at fair value
as part of the business combination accounting and then amortized as an
intangible asset on a straight-line basis over the expected useful life of the
contract of 15 years. "Amortization of intangible assets and route and customer
acquisition costs" aggregates the non-cash amortization charges relating to
upfront route and customer acquisition cost payments and location contracts
acquired, as well as the amortization of other intangible assets.
(2)Stock-based compensation consists of options, restricted stock units, and
performance-based restricted stock units.
(3)Loss (gain) on change in fair value of contingent earnout shares represents a
non-cash fair value adjustment at each reporting period end related to the value
of these contingent shares. Upon achieving such contingency, shares of Class A-2
common stock convert to Class A-1 common stock resulting in a non-cash
settlement of the obligation.
(4)Other expenses, net consists of (i) non-cash expenses including the
remeasurement of contingent consideration liabilities,
(ii) non-recurring lobbying and legal expenses related to distributed gaming
expansion in current or prospective markets, and (iii) other non-recurring
expenses.
(5)Calculated by excluding the impact of the non-GAAP adjustments from the
current period tax provision calculations.
(6)Emerging markets consist of the results, on an Adjusted EBITDA basis, for
non-core jurisdictions where our operations are developing. Markets are no
longer considered emerging when we have installed or acquired at least 500
gaming terminals in the jurisdiction, or when 24 months have elapsed from the
date we first install or acquire gaming terminals in the jurisdiction, whichever
occurs first. We currently view Nebraska , Iowa and Pennsylvania as emerging
markets. Prior to July 2022 , Georgia was considered an emerging market.
Adjusted EBITDA for the three months ended March 31, 2023 , was $46.1 million , an
increase of $10.9 million , or 30.9%, compared to the prior-year period. The
increase in performance for the three months ended March 31, 2023 was
attributable to an increase in the number of locations and gaming terminals, due
primarily to the acquisition of Century.
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Liquidity and Capital Resources
In order to maintain sufficient liquidity, we review our cash flow projections and available funds with our Board of Directors to consider modifying our capital structure and seeking additional sources of liquidity, if needed. The availability of additional liquidity options will depend on the economic and financial environment, our creditworthiness, our historical and projected financial and operating performance, and our continued compliance with financial covenants. As a result of possible future economic, financial and operating declines, possible declines in our creditworthiness and potential non-compliance with financial covenants, we may have less liquidity than anticipated, fewer sources of liquidity than anticipated, less attractive financing terms and less flexibility in determining when and how to use the liquidity that is available. We believe that our cash and cash equivalents, cash flows from operations and borrowing availability under our senior secured credit facility will be sufficient to meet our capital requirements for the next twelve months. Our primary short-term cash needs are paying operating expenses and contingent earnout payments, servicing outstanding indebtedness, and funding our Board of Directors approved share repurchase program and near term acquisitions. As ofMarch 31, 2023 , we had$228.5 million in cash and cash equivalents.
Senior Secured Credit Facility
OnNovember 13, 2019 , we entered into a credit agreement (the "Credit Agreement") as borrower, with our wholly-owned domestic subsidiaries, as guarantors, the banks, financial institutions and other lending institutions from time to time party thereto, as lenders, the other parties from time to time party thereto andCapital 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.
The additional term loan facility was available for borrowings until
Given the uncertainty of COVID-19 and the resulting potential impact to the gaming industry and our future assumptions, as well as to provide additional financial flexibility, we and the other parties thereto amended the Credit Agreement onAugust 4, 2020 to provide a waiver of financial covenant breach for the periods endedSeptember 30, 2020 throughMarch 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 0.50% and the floor for the Base Rate to 1.50%. We incurred costs of$0.4 million associated with the amendment of the Credit Agreement, of which$0.3 million was capitalized and will be amortized over the remaining life of the facility. The waivers of financial covenant breach were never utilized as we remained in compliance with all debt covenants during these periods. 32
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On
•an increase in the amount of the revolving credit facility from
•a
•a new
The maturity date of the Credit Agreement was extended to
As of
The obligations under the Credit Agreement are guaranteed by us and our
wholly-owned domestic subsidiaries, subject to certain exceptions (collectively,
the "Guarantors"). The obligations under the Credit Agreement are secured by
substantially all of the assets of the Guarantors, subject to certain
exceptions. Certain future-formed or acquired wholly-owned domestic subsidiaries
by us will also be required to guarantee the Credit Agreement and grant a
security interest in substantially all of our assets (subject to certain
exceptions) to secure the obligations under the Credit Agreement.
Borrowings under the Credit Agreement bear interest, at our 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 March 31, 2023 , the weighted-average interest rate
was approximately 6.8%.
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. We are
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.
The applicable LIBOR and ABR margins and the commitment fee rate are calculated
based upon the first lien net leverage ratio of us and our restricted
subsidiaries on a consolidated basis, as defined in the Credit Agreement. The
revolving loans and term loans bear interest at either (a) ABR (150 bps floor)
plus a margin up to 1.75% or (b) LIBOR (50bps floor) plus a margin up to 2.75%,
at our option.
The term loans and, once drawn, the additional term loans will amortize at an
annual rate equal to 5.00% per annum. Upon the consummation of certain
non-ordinary course asset sales, we 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 us and certain of our affiliates obligated under the Credit Agreement to make customary representations and warranties in connection with credit extensions thereunder.
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In addition, the Credit Agreement requires us 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 by us 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.
We were in compliance with all debt covenants as of
Interest rate caplets
We manage our exposure to some of its interest rate risk through the use of interest rate caplets, which are derivative financial instruments. OnJanuary 12, 2022 , we hedged the variability of the cash flows attributable to the changes in the 1-month LIBOR interest rate on the first$300 million of the term loan under the Credit Agreement by entering into a 4-year series of 48 deferred premium caplets ("caplets"). The caplets mature at the end of each month and protect us if interest rates exceed 2% of 1-month LIBOR. The maturing dates of these caplets coincide with the timing of our interest payments and each caplet is expected to be highly effective at offsetting changes in interest payment cash flows. The aggregate premium for these caplets was$3.9 million , which was the initial fair value of the caplets recorded in our financial statements, and was financed as additional debt. We recognized an unrealized gain on the change in fair value of the interest rate caplets of$2.2 million and$4.9 million , net of taxes, for the three months endedMarch 31, 2023 and 2022, respectively. Further, as the 1-month LIBOR interest rate exceeded 2% beginning in the second half of 2022, the Company recognized interest income on the caplets of$1.9 million for the three months endedMarch 31, 2023 , which is reflected in interest expense, net in the condensed consolidated statements of operations and other comprehensive income.
Cash Flows
The following table summarizes net cash provided by or used in operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our condensed consolidated financial statements and the notes thereto included in this filing:
Three Months Ended
(in thousands) March 31,
2023 2022
Net cash provided by operating activities
Net cash used in investing activities (23,585) (6,387)
Net cash used in financing activities (9,982) (19,562)
Net cash provided by operating activities
For the three months ended
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Net cash used in investing activities
For the three months endedMarch 31, 2023 , net cash used in investing activities was$23.6 million , an increase of$17.2 million over the comparable period and was primarily attributable to more cash used for the purchases of property and equipment. We anticipate our capital expenditures for the purchases of property and equipment will be approximately$50-60 million in 2023.
Net cash used in financing activities
For the three months endedMarch 31, 2023 , net cash used in financing activities was$10.0 million , a decrease of$9.6 million over the comparable period. The decrease reflects a reduction in repurchases of our Class A-1 common stock under our share repurchase program.
Critical Accounting Policies and Estimates
In preparing our condensed consolidated financial statements, we applied the same critical accounting policies as described in our Annual Report on Form 10-K for the year endedDecember 31, 2022 that affect judgments and estimates of amounts recorded for certain assets, liabilities, revenues, and expenses.
Seasonality
Our results of operations can fluctuate due to seasonal trends and other factors. For example, the gross revenue per machine per day is typically lower in the summer when players will typically spend less time indoors at our locations, and higher in cold weather between February and April, when players will typically spend more time indoors at our locations. Holidays, vacation seasons, and sporting events may also cause our results to fluctuate.
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