Accel Entertainment, Inc.ACEL
Accel Entertainment, Inc. Stock Compensation Disclosure
Stock-based Compensation
The Company previously adopted the 2011 Equity Incentive Plan of Accel Entertainment, Inc., and 2016 Equity Incentive Plan of Accel Entertainment, Inc., (collectively, “Plans”). Under the Plans, the aggregate number of shares of common stock that may be issued or transferred pursuant to options, restricted stock awards, or stock appreciation rights under the Plans will not exceed 10 percent of the outstanding shares of the Company.
In 2019, the Company adopted the Long Term Incentive Plan (the “LTIP”). The LTIP provides for grants of a variety of stock-based awards to employees and non-employees for providing services to the Company, including, but not limited to incentive stock options qualified as such under U.S. federal income tax laws, stock options that do not qualify as incentive stock options, stock appreciation rights, restricted stock awards, RSUs, PSUs, cash incentive awards, and other stock-based awards. The Company has reserved, and in January 2020 registered, a total of 6,000,000 shares of Class A-1 common stock for issuance pursuant to the LTIP, subject to certain adjustments set forth therein.
Stock-based awards are valued on the date of grant and are expensed over the required service period. Total stock-based compensation expense recognized during the years ended December 31, 2024, 2023 and 2022, was $12.2 million, $9.4 million and $6.8 million, respectively. As of December 31, 2024, and 2023, there was approximately $13.9 million and $16.1 million, respectively, of unrecognized compensation expense related to stock-based awards, which is expected to be recognized through 2028.
During the years ended December 31, 2024, 2023 and 2022, the Company recognized gross excess tax (expense) benefit from stock-based compensation of $(0.1) million, $(0.9) million, and $0.1 million, respectively. Excess tax benefits reflect the total realized value of the Company’s tax deductions from individual stock option exercise transactions and the vesting of restricted stock awards in excess of the deferred tax assets that were previously recorded.
Grant of RSUs
The Company issued 918,103 RSUs to eligible employees and Directors of the Company during the year ended December 31, 2024, which will vest over a period of 2 to 5 years for employees and a period of 1 year for Directors. The RSUs are valued using the stock price on the grant date and had an estimated grant date fair value of $9.8 million.
The following table sets forth the activities of the Company’s RSUs for the years ended December 31, 2024, 2023 and 2022.
| Non-vested RSUs | Shares | Weighted Average Grant Date Fair Value | ||||||||||||
Nonvested at January 1, 2022 | 1,593,729 | $ | 11.55 | |||||||||||
| Granted | 569,600 | $ | 12.16 | |||||||||||
Vested (1) | (383,088) | $ | 11.51 | |||||||||||
| Forfeited | (361,532) | $ | 11.03 | |||||||||||
| Nonvested at December 31, 2022 | 1,418,709 | $ | 11.94 | |||||||||||
| Granted | 937,738 | $ | 9.36 | |||||||||||
Vested (2) | (652,767) | $ | 11.11 | |||||||||||
| Forfeited | (150,014) | $ | 11.07 | |||||||||||
| Nonvested at December 31, 2023 | 1,553,666 | $ | 10.81 | |||||||||||
| Granted | 918,103 | $ | 10.67 | |||||||||||
Vested (3) | (765,463) | $ | 11.12 | |||||||||||
| Forfeited | (155,269) | $ | 10.10 | |||||||||||
| Nonvested at December 31, 2024 | 1,551,037 | $ | 10.65 | |||||||||||
(1) Includes 273,358 RSUs that are vested and not issued.
(2) Includes 379,719 RSUs that are vested and not issued.
(3) Includes 522,270 RSUs that are vested and not issued.
Grant of PSUs
The Company issued 149,381 PSUs to eligible employees during the year ended December 31, 2024. The PSUs are valued using the stock price and a performance expense factor on the grant date and had an estimated grant date fair value of $1.7 million. Performance-based shares vest based upon the passage of time and the achievement of performance conditions, in an amount ranging from 0% to 200% of the grant amount, as determined by the Compensation Committee prior to the date of the award. Vesting periods for these awards are 2 to 3 years, with each year weighted equally in determining such average. The Company reviews the progress toward the attainment of the performance condition for each quarter during the vesting period. When it is probable the minimum performance condition for an award will be achieved, the Company began recognizing the expense equal to the proportionate share of the total fair value of the Class A-1 stock price on the grant date. The total expense recognized over the duration of performance awards will equal the Class A-1 stock price on the date of grant multiplied by the number of shares ultimately awarded based on the level of attainment of the performance condition. For grants with a market condition and a service condition, the fair value is determined on the grant date and is calculated using the average implied multiple using the Company’s internal forecast along with weighting of probability of award, with a service condition of three years. The total expense recognized over the duration of the award will equal the fair value, regardless if the market performance criteria is met. If the service condition is not met the stock-based compensation would be reversed.
The following table sets forth the activities of the Company’s PSUs for the years ended December 31, 2024 and 2023.
Non-vested PSUs | Shares | Weighted Average Grant Date Fair Value | ||||||||||||
Nonvested at January 1, 2023 | — | $ | — | |||||||||||
| Granted | 702,741 | $ | 8.62 | |||||||||||
Adjustments for Performance Measures | (236,399) | $ | 8.68 | |||||||||||
| Vested | — | $ | — | |||||||||||
| Forfeited | — | $ | — | |||||||||||
| Nonvested at December 31, 2023 | 466,342 | $ | 8.62 | |||||||||||
| Granted | 149,381 | $ | 11.34 | |||||||||||
| Adjustments for Performance Measures | 466,342 | $ | 9.33 | |||||||||||
Vested | — | $ | — | |||||||||||
| Forfeited | — | $ | — | |||||||||||
| Nonvested at December 31, 2024 | 1,082,065 | $ | 9.09 | |||||||||||
Grant of Stock Options
Stock options generally vest over a to five-year period and the term of the options are a maximum of 10 years from the grant date. The exercise price of stock options shall not be less than 100% of the fair market value per share of common stock on the grant date.
The Company used the Black-Scholes formula to estimate the fair value of its stock-based payments. The volatility assumption used in the Black-Scholes formula were based on the volatility of comparable public companies. The Company determined the share price at grant date used in the Black-Scholes formula based on an internal valuation model for options granted prior to the Company going public. Upon going public, the Company used the closing market stock price on the date of grant.
The fair value assigned to each option was estimated on the date of grant using a Black-Scholes-based option valuation model. The expected term of each option granted represented the period of time that each option granted is expected to be outstanding. The risk-free rate for periods within the contractual life of the unit is based on U.S. Treasury yields in effect at the time of grant.
Starting on January 1, 2023, the Company discontinued the use of stock options as part of the LTIP and there were no stock options granted to eligible officers and employees during 2023 and 2024.
The following assumptions were used in the option valuation model for options granted during the year ended December 31 as follows:
| 2022 | |||||
Expected approximate volatility | 60% | ||||
Expected dividends | None | ||||
Expected term (in years) | 7 | ||||
Risk-free rate | 2.12% - 4.04% | ||||
A summary of the options granted and the range in vesting periods based on specific provisions within the option agreements during the year ended December 31, are as follows:
| 2022 | |||||
Options granted | 315,881 | ||||
Vesting period (in years) | 4 | ||||
The following table sets forth the activities of the Company’s outstanding stock options for the years ended December 31, 2024, 2023, and 2022.
| Outstanding options | Shares | Weighted Average Grant Date Fair Value | Weighted Average Exercise Price | |||||||||||||||||
| Outstanding at January 1, 2022 | 1,556,486 | $ | 4.51 | $ | 10.47 | |||||||||||||||
| Granted | 315,881 | $ | 7.30 | $ | 12.09 | |||||||||||||||
| Exercised | (136,998) | $ | 2.20 | $ | 5.93 | |||||||||||||||
| Forfeited/expired | (436,960) | $ | 4.79 | $ | 10.97 | |||||||||||||||
| Outstanding at December 31, 2022 | 1,298,409 | $ | 7.25 | $ | 11.18 | |||||||||||||||
| Granted | — | $ | — | $ | — | |||||||||||||||
| Exercised | (80,315) | $ | 1.65 | $ | 4.67 | |||||||||||||||
| Forfeited/expired | (58,717) | $ | 5.25 | $ | 12.10 | |||||||||||||||
| Outstanding at December 31, 2023 | 1,159,377 | $ | 5.60 | $ | 11.58 | |||||||||||||||
| Granted | — | $ | — | $ | — | |||||||||||||||
| Exercised | (55,173) | $ | 1.84 | $ | 5.24 | |||||||||||||||
| Forfeited/expired | (37,451) | $ | 6.04 | $ | 12.06 | |||||||||||||||
| Outstanding at December 31, 2024 | 1,066,753 | $ | 5.60 | $ | 11.58 | |||||||||||||||
A summary of the status of the activities of the Company’s nonvested stock options for the years ended December 31, 2024, 2023 and 2022 is as follows:
| Nonvested options | Shares | Weighted Average Grant Date Fair Value | ||||||||||||
| Nonvested at January 1, 2022 | 1,411,331 | $ | 4.77 | |||||||||||
| Granted | 315,881 | $ | 7.30 | |||||||||||
| Vested | (314,462) | $ | 4.17 | |||||||||||
| Forfeited | (321,682) | $ | 4.86 | |||||||||||
| Nonvested at December 31, 2022 | 1,091,068 | $ | 5.65 | |||||||||||
| Granted | — | $ | — | |||||||||||
| Vested | (393,550) | $ | 5.54 | |||||||||||
| Forfeited | (54,717) | $ | 5.27 | |||||||||||
| Nonvested at December 31, 2023 | 642,801 | $ | 5.75 | |||||||||||
| Granted | — | $ | — | |||||||||||
| Vested | (330,292) | $ | 5.69 | |||||||||||
| Forfeited | — | $ | — | |||||||||||
| Nonvested at December 31, 2024 | 312,509 | $ | 5.76 | |||||||||||
As of December 31, 2024, and 2023, a total of 524,739 and 516,576 options with a weighted-average remaining contractual term of 4.83 and 5.7 years, respectively, granted to employees were vested. The fair value of options that vested during 2024, 2023 and 2022 was $1.9 million, $2.2 million, and $1.3 million, respectively. As of December 31, 2024, and 2023, the weighted-average exercise price of the non-vested awards was $11.92 for both years. As of December 31, 2024, and 2023, the weighted-average remaining contractual term of the outstanding awards was 5.5 years and 6.4 years, respectively. The total intrinsic value of options that were exercised during the years ended December 31, 2024, 2023 and 2022 was approximately $0.3 million, $0.5 million and $0.6 million, respectively. The aggregate intrinsic value of options outstanding as of December 31, 2024 is $0.5 million.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.