Company: ACEL
Filing Date: 2025-05-05
Form Type: 10-Q
Source: 0001698991-25-000023
Chunk: 65

Company: Accel Entertainment, Inc.
Filing Date: 2025-05-05
Form: 10-Q
Item: Item 2
Chunk 65
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 31, 2025 was $8.7 million, which was essentially flat compared to the prior-year period. We experienced an increase in average outstanding debt, which was offset by lower interest expense. For the three months ended March 31, 2025, the weighted average interest rate, excluding the impact of our interest rate caplets, was approximately 6.5% compared to 7.7% in the prior-year period.

(Gain) loss on change in fair value of contingent earnout shares

The change in the fair value of contingent earnout shares for the three months ended March 31, 2025 was a gain of $2.4 million, compared to a loss of $4.7 million the prior-year period. The change was primarily due to the change in the market value of our Class A-1 common stock, which is the primary input to the valuation of the contingent earnout shares. 

Income tax expense

Income tax expense for the three months ended March 31, 2025 was $5.0 million, an increase of $0.2 million, or 4.7%, compared to the prior-year period. The effective tax rate for the three months ended March 31, 2025 was 25.5% compared to 39.1% in the prior-year period. Our effective income tax rate can vary from period to period depending on, among other factors, the amount of permanent tax adjustments and discrete items. The change in the fair value of the contingent earnout shares is considered a discrete item for tax purposes and can be the primary driver for the fluctuations in the tax rate year over year.

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 with U.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

•Location hold-per-day

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