Company: ACEL
Filing Date: 2025-03-03
Form Type: 10-K
Source: 0001698991-25-000011
Chunk: 85

Company: Accel Entertainment, Inc.
Filing Date: 2025-03-03
Form: 10-K
Item: Item 16
Chunk 85
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 Consolidated Financial Statements — (Continued)

Fair Value Measurement at Reporting Date UsingDecember 31, 2023Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Liabilities:Contingent consideration$5,484 $— $— $5,484 Contingent earnout shares31,827 — 31,827 — Warrants13 — 13 — Total$37,324 $— $31,840 $5,484 Contingent considerationThe 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. The valuation of the Company's contingent consideration is considered to be a Level 3 fair value measurement as the significant inputs are unobservable and require significant judgment or estimation. Changes in the fair value of contingent consideration liabilities are classified within other expenses, net on the accompanying consolidated statements of operations and comprehensive income.Contingent earnout shares The Company determined the fair value of the contingent earnout shares based on the market price of the Company's A-1 common stock. The liability, by tranche, is then stated at present value based on i) an interest rate derived from the Company's borrowing rate and the applicable risk-free rate and ii) an estimate on when it expects the contingent earnout shares to convert to A-1 common stock. The valuation of the Company's contingent consideration is considered to be a Level 2 fair value measurement. Changes in the fair value of contingent earnout shares are included within loss (gain) on change in fair value of contingent earnout shares on the accompanying consolidated statements of operations and comprehensive income.WarrantsThe Company’s 5,144 warrants expired in November 2024. The liability for warrants was included in other long-term liabilities on the consolidated balance sheets and was considered to be a Level 2 fair value measurement. Upon expiration of the warrants, the Company reduced the fair value of the warrants to zero and recognized a gain on the expiration of warrants of less than $0.1 million on the consolidated statements of operations and comprehensive incomeThe following table