Route and Customer Acquisition Costs

9 Months Ended

Sep. 30, 2022

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 that 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, were approximately $8.1 million and $6.8 million as of September 30, 2022 and December 31, 2021, 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 was $7.3 million and $6.0 million as of September 30, 2022 and December 31, 2021, respectively, of which approximately $3.0 million and $2.1 million is included in current liabilities in the accompanying condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively. The route and customer acquisition cost asset was comprised of payments made on the contracts of $17.9 million and $18.0 million as of September 30, 2022 and December 31, 2021, 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 clawback provision if the customer cancels the contract prior to completion. The payments subject to a clawback were $1.2 million and $1.5 million as of September 30, 2022 and December 31, 2021, respectively.

Route and customer acquisition costs consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

	September 30, 2022		December 31, 2021
Cost	$	31,198	$	28,902
Accumulated amortization	(13,429)		(12,989)
Route and customer acquisition costs, net	$	17,769	$	15,913

Amortization expense of route and customer acquisition costs was $0.3 million and $0.9 million for the three and nine months ended September 30, 2022. In comparison, 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, 2021. Amortization expense of route and customer acquisition costs was lower in 2022 when compared to the prior year as the Company extended the amortization period of its route and customer acquisition costs from 12.4 years to 18 years in the fourth quarter of 2021.