Route and Customer Acquisition Costs
The Company enters into contracts with third parties and its gaming locations to install and operate gaming terminals. Payments are due when gaming operations commence and then on a periodic basis for a specified period of time thereafter. Gross payments due, based on the number of live locations, are approximately $11.2 million and $7.4 million as of December 31, 2024 and 2023, 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 $9.4 million and $6.5 million as of December 31, 2024 and 2023, respectively, of which approximately $2.2 million and $1.5 million, included in current liabilities in the accompanying consolidated balance sheets as of both December 31, 2024 and 2023, respectively. The route and customer acquisition cost asset is comprised of upfront payments made on the contracts of $22.3 million and $20.0 million as of December 31, 2024 and 2023, 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 $1.2 million and $1.0 million as of December 31, 2024 and 2023, respectively.
Route and customer acquisition costs consist of the following as of December 31 (in thousands):
| | | | | | | | | | | |
| 2024 | | 2023 |
| Cost | $ | 39,204 | | | $ | 33,855 | |
| Accumulated amortization | (15,946) | | | (14,667) | |
| Route and customer acquisition costs, net | $ | 23,258 | | | $ | 19,188 | |
Estimated amortization expense related to route and customer acquisition costs for the next five years and thereafter is as follows (in thousands):
| | | | | |
| Year ending December 31: | |
| 2025 | $ | 2,541 | |
| 2026 | 2,472 | |
| 2027 | 2,383 | |
| 2028 | 2,258 | |
| 2029 | 1,885 | |
| Thereafter | 11,719 | |
| Total | $ | 23,258 | |
Amortization expense of route and customer acquisition costs was $2.3 million, $1.6 million and $1.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.