ITEM 1A. RISK FACTORS
You should carefully consider the risk factors set forth below as well as the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. Any of the following risks could materially and adversely affect our business, financial condition, results of operations and cash flows. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially adversely affect our business, financial condition, or results of operations.
Summary of Risk Factors
Below is a summary of the principal factors that make an investment in our Class A-1 common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our Class A-1 common stock.
• Our ability to operate in existing markets and to expand into new jurisdictions depends on obtaining, maintaining and renewing a complex set of licenses and regulatory approvals, which vary widely by jurisdiction and can be extensive.
• Our revenue growth and future success depends on successfully entering and scaling in new markets and introducing new and appealing products and services amid uncertain market demand and regulatory outcomes, none of which is assured.
• We operate in the highly competitive and evolving gaming and entertainment landscape, and our ability to sustain growth depends on maintaining our competitive position across distributed gaming and adjacent areas of entertainment.
• We are dependent on a concentrated network of key manufacturers, developers and third party providers for gaming terminals, amusement machines, and related software, content, and technologies.
• We depend heavily on our ability to win, maintain and renew contracts with location partners.
• Our expansion into casino operations and horse racing may not be successful.
• Our results of operations are highly sensitive to discretionary consumer spending and broader macroeconomic and socio-political conditions; our concentration in Illinois, Montana and Nevada heightens exposure to local conditions.
• We are subject to strict government regulations that are constantly evolving and may be amended, repealed, or subject to new interpretations, which may limit existing operations, have an adverse impact on the ability to grow or may expose us to fines or other penalties.
• Our success depends on the security, integrity and regulatory compliance of our products, services and systems; technical incidents, cyber events, product defects or integrity failures could result in regulatory action, liability and reputational harm.
• Our business depends on the protection of intellectual property and proprietary information.
• We may not be able to capitalize on trends and changes in the gaming industries, and efforts to curtail the expansion of legalized gaming, if successful, could limit our growth of operations.
• Our level of indebtedness and the cash required to service it could adversely affect our results of operations and liquidity.
• Certain stockholders own a significant portion of our Class A-1 common stock, and they may have interests that differ from those of other stockholders.
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Risks Related to Our Business and Industry
Our ability to operate in existing markets and to expand into new jurisdictions depends on obtaining, maintaining and renewing a complex set of licenses and regulatory approvals, which vary widely by jurisdiction and can be extensive.
We operate only in jurisdictions where gaming is legal. Our ability to operate in existing markets and to expand into new jurisdictions depends on obtaining, maintaining, and renewing a complex set of licenses, permits, product certifications, and regulatory approvals for us and for certain of our stakeholders, that vary widely by jurisdiction and can be extensive and time-consuming. Regulators evaluate a broad range of factors—including financial stability, integrity, business experience, and the individual suitability of officers, directors, major equity holders, lenders, key employees, and business partners—and may condition, suspend, revoke, or deny required registrations, licenses, permits or approvals at any time, which could prevent us from entering or continuing to operate in affected jurisdictions and could have adverse effects on our results of operations, cash flows, and financial condition. Failures or delays by our location partners or other stakeholders in obtaining their own required licenses can likewise impede our operations and growth, and negative licensing outcomes in one state can adversely affect eligibility and approvals in others.
Gaming and horse racing laws and regulations are constantly evolving and subject to amendment, repeal, and new interpretations by authorities with broad enforcement powers, including the authority to investigate, impose fines and penalties, and restrict or revoke licenses. Adverse regulatory actions or unfavorable legislative changes, including new or increased taxes and fees, could limit existing operations, constrain our growth, or expose us to penalties. Some jurisdictions also require background checks, disclosure and suitability determinations of us and certain of our affiliates, significant stockholders, directors, officers, and key employees and nonadherence to such requirements or findings of unsuitability can jeopardize our ability to obtain or maintain licensure, require us to modify or terminate relationships with those parties or forgo doing business in those jurisdictions. Further, these licensing procedures, background investigations and suitability determination requirements may discourage potential investors or inhibit changes in existing holdings in ways that impact our strategic flexibility.
Our revenue growth and future success depends on successfully entering and scaling in new markets and introducing new and appealing products and services amid uncertain market demand and regulatory outcomes, none of which is assured.
Our revenue growth and future success depend in large part on the successful addition of new locations as partners (whether through organic growth or acquisitions) and on the entry into new markets. Our ability to succeed in new markets depends in part on displacing entrenched competitors and developing or expanding sales channels and leveraging partner relationships. In many cases, we are attempting to enter into or expand our presence in these newer markets, where the appeal and success of gaming terminals and other forms of entertainment has not yet been proven. There can be no assurance that gaming will have success with new location partners or in new markets, or that we will succeed in capturing a significant or even acceptable market share in any new markets. If we fail to successfully expand into these markets, we may have difficulty growing our business and may lose business to our competitors.
Success in new and existing markets also depends on our and our suppliers’ ability to deliver timely, creative and appealing content for gaming terminals, stand-alone ATMs, redemption devices and amusement devices that match evolving consumer preferences; however, game popularity is cyclical and unpredictable, and our suppliers face inventory, pricing and approval constraints that can limit availability or increase our costs, which could harm our ability to refresh content, retain locations, or attract new partners.
Failure to accurately anticipate the needs of location and player preferences could result in loss of business to competitors, which would adversely affect our results of operations, cash flows and financial condition. Much of the content included must receive regulatory certifications or approvals before deployment, and these approvals can be delayed or denied, limiting our ability to launch new offerings, secure placements with location partners, or expand into additional jurisdictions on anticipated timelines or at all. Beyond product expansion, we are continuously evaluating additional opportunities that are complementary to our core business, such as our acquisition of the Fairmount Park - Casino & Racing (“Fairmount”) in Collinsville, Illinois. Any acquisition of additional businesses, services, resources or assets, including gaming parlors, casinos or hospitality/retail
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operations, may subject us to additional risks. With any such expansion, we encounter additional industry‑specific regulatory regimes, development and construction risks, and operational complexities that could delay projects, increase capital needs, and impair anticipated returns if approvals are slow, conditions are imposed, or market acceptance does not materialize as expected.
At the same time, slow growth or declines in demand for gaming terminals could reduce demand for our services and negatively impact our results of operations, cash flows and financial condition. Even with the expansion of gaming into new jurisdictions, the opening of new locations and the addition of new gaming terminals and amusement machines in existing locations, demand for our services may decline due to location partner preferences, unfavorable economic conditions, the failure to obtain regulatory approvals, or the availability of financing for location partners and for us, any of which could constrain growth, reduce returns on new deployments, and divert resources from other initiatives. Competitive pressures from other gaming and entertainment options, including online and mobile gaming, casinos and alternative leisure activities, further increase execution risk and could adversely affect our ability to capture share in new or existing markets.
We face significant competition from other gaming and entertainment operations, and our success in part relies on maintaining our competitive advantages and market share in key markets.
We are dependent on a concentrated network of key manufacturers, developers, and third-party providers for gaming terminals, amusement machines, redemption devices, stand-alone ATMs, and related software, content, and technologies, many of which require regulatory approvals before they can be marketed or deployed. Any interruption, delay, or deterioration in supply—including from insolvency or financial distress of a key provider, serious quality control lapses, regulatory issues with a supplier or its products or licenses, tariffs and trade barriers (including those affecting imports from China), or broader supply chain dislocations—could impair our ability to procure equipment, refresh content, service existing placements, or meet contractual obligations to location partners, thereby adversely affecting our results of operations, cash flows, and financial condition. Our centralized purchasing program has delivered cost efficiencies but increases exposure to the credit and counterparty risks associated with a small number of suppliers, and during 2023 and the first half of 2024, we accelerated capital expenditures to manage component availability and supply timing, resulting in higher capital expenditures for the year than we had originally anticipated.
The gaming equipment sector has experienced significant consolidation, and a substantial portion of U.S. gaming terminals is manufactured by a small number of companies. This concentration, together with cyclical demand for components and content, can lead to price and delivery volatility and reduce our bargaining leverage. If we lose a supplier, we may be unable to replace it on acceptable terms or timelines, and remaining suppliers may increase fees and costs. Even where alternative sources exist, the limited number of qualified vendors in distributed gaming and the need for regulatory certifications can constrain substitution, resulting in longer lead times, higher prices, life-cycle and end-of-life component challenges, and product quality issues. Failure by key suppliers to meet delivery commitments or to provide compliant, timely, and competitively priced products could cause delays, trigger breaches or loss of contracts with location partners, and limit our ability to introduce new or refreshed offerings.
Further, we rely on specialized third-party technologies and services-such as know-your-customer, geolocation, identity verification, and payment processing-that are embedded in, or integral to, our products and programs, including our Player Rewards Program. If these technologies become unavailable on acceptable terms, experience outages or defects, or require re-certification that is delayed or denied, we may face service disruptions, increased operating expenses, and lost revenue opportunities. Collectively, these supply-side risks—including supplier concentration, industry consolidation, regulatory gating, limited alternative sources, and price and delivery volatility—could materially and adversely affect our operations, growth initiatives, and financial performance.
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We depend heavily on our ability to win, maintain and renew contracts with our location partners, and we could lose substantial revenue if we are unable to renew certain of our contracts on substantially similar terms or at all.
Our contracts with our location partners generally contain initial multi-year terms. While we have historically experienced high rates of contract extension or renewal, changes in applicable laws, regulations or rules, as well as other factors, may result in declines in contract extensions or renewals. These factors may include, for example, actions by regulators or licensing authorities, changes in our location partners’ business strategies, financial condition or ownership, competitive pressures, consolidation among partners, budget constraints, market or economic conditions, or other circumstances outside of our control. The termination, expiration or failure to renew one or more of our contracts with our location partners could cause us to lose substantial revenue, which could have an adverse effect on our ability to win or renew other contracts or pursue growth initiatives. In addition, we may not be able to obtain new or renewed contracts with location partners that contain terms that are as favorable as our current terms in its current contracts, and any less favorable contract terms or diminution in scope could negatively impact our business.
In addition, our revenue, business, results of operations, cash flows and financial condition could be negatively affected if our location partners sell or merge themselves or their locations with other entities. Upon the sale or merger of such locations, our location partners could choose to no longer partner with us and decide to contract with our competitors.
If we fail to offer a high-quality experience, our business and reputation may suffer.
Once we install gaming terminals and amusement machines in location partners, those location partners rely on our support to resolve any related issues. High-quality user and location education and customer service to the licensed establishments have been key to our brand and is important for the successful marketing and sale of our products and services and to increase the number of gaming terminals and amusement machines at our location s. The importance of high-quality customer service to our location s will increase as we expand our business and pursue new location partners and potentially expand into new jurisdictions. In some cases, we depend on third parties to resolve such issues, the performance of which is out of our control. Further, our success is highly dependent on business reputation and positive recommendations from existing location partners. Any failure to maintain high-quality levels of service, or a market perception that we do not maintain a high-quality service to our location s, could jeopardize the retention or renewal of location partner contracts and harm our reputation, our ability to market to existing and prospective location partners, and our results of operations, cash flows and financial condition.
In addition, as we continue to grow our operations and expand into additional jurisdictions, we need to be able to provide efficient support that meets the needs of our location partners. The number of location s with our products has grown significantly and that may place additional pressure on our support organization. As our base of location partners continues to grow, we may need to increase the number of relationship managers, customer service and other personnel we employ to provide personalized account management, assistance to our location partners in navigating regulatory applications and ongoing compliance concerns, and customer service, training, and revenue optimization. If we are not able to continue to provide high levels of customer service, our reputation, as well as our results of operations, cash flows and financial condition, could be harmed.
Our revenue growth and ability to achieve and sustain profitability will depend, in part, on being able to expand our sales force and increase the productivity of our sales force.
Most of our revenue has been attributable to the efforts of our sales force, which consists of both in-house personnel and independent agents.
Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, and retaining sufficient numbers of in-house and independent sales personnel to support growth. New sales personnel require significant training and can take a number of months to achieve full productivity. Our recent hires and planned hires may not become productive as quickly as expected, and if new sales employees and agents do not become fully productive on the timelines that have been projected or at all, our revenue may not increase at anticipated levels and our ability to achieve long-term projections may be negatively impacted. In addition, as we continue to grow, a larger percentage of our sales force will be new to us and our business, which may adversely affect our sales if we cannot train our sales force quickly or effectively. Attrition rates
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may increase, and we may face integration challenges as we continue to seek to expand our sales force. We also believe that there is significant competition for sales personnel with the skills that we require in the industries in which we operate and may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we operate or plan to operate. If we are unable to hire and train sufficient numbers of effective sales personnel or agents, or if the sales personnel or agents are not successful in obtaining new location partners or promoting activity within our existing location partners, our business may be adversely affected.
We periodically change and adjust our sales organization in response to market opportunities, competitive threats, product and service introductions or enhancements, acquisitions, sales performance, increases in sales headcount, cost levels, and other internal and external considerations. Any future sales organization changes may result in a temporary reduction of productivity, which could negatively affect our rate of growth. In addition, any significant change to the way we structure the compensation of our sales organization may be disruptive and may affect revenue growth.
Our inability to complete acquisitions and integrate acquired businesses successfully could limit our growth or disrupt our plans and operations.
We continue to pursue expansion and acquisition opportunities in gaming and related businesses. Our ability to succeed in implementing our strategy will depend to some degree upon our ability to identify and complete commercially viable acquisitions. We may not be able to find acquisition opportunities on acceptable terms or at all or obtain necessary financing or regulatory approvals to complete potential acquisitions.
We may not be able to successfully integrate any businesses that we acquire or do so within intended timeframes. We could face significant challenges in managing and integrating our acquisitions and combined operations, including acquired assets, operations and personnel, as well as maintaining or developing, procedures and policies (including effective internal control over financial reporting and disclosure controls and procedures). In addition, any expected cost synergies associated with such acquisitions may not be fully realized in the anticipated amounts or within the contemplated timeframes or cost expectations, which could result in increased costs and have an adverse effect on our results of operations, cash flows and financial condition. We expect to incur incremental costs and capital expenditures related to our contemplated integration activities.
Acquisition transactions may disrupt our ongoing business. The integration of acquisitions will require significant time and focus from management and may divert attention from the day-to-day operations of the combined business or delay the achievement of strategic objectives. These risks may be heightened when we enter into regions where we have no or limited prior experience. Our business may be negatively impacted following the acquisitions if we are unable to effectively manage expanded operations.
Our expansion into casino operations and horse racing may not be successful.
Prior to our December 2024 acquisition of Fairmount, we had not previously designed, developed and operated a casino or racetrack. Horse racing is highly dependent on people not only attending outdoor live horse races but also wagering on and sponsoring them. If interest in horse racing declines due to external factors such as unfavorable weather conditions, shifting consumer preferences or accidents, a resulting decrease in attendance, wagering and sponsorship demand, along with negative publicity and insurance issues generated from potential injuries and/or litigation, could have a material adverse impact on our horse racing business. In addition, our horse racing operations depend on agreements with various groups, including food and beverage professionals and groups that represent horsemen, such as the Illinois Thoroughbred Horsemen's Association and the Illinois Horsemen's Benevolent & Protective Association. Any failure to maintain or renew agreements with such groups, or a deterioration in our relationship with them, could adversely affect our horse racing business.
Our horse racing and casino operations also depend on the public perception of fairness and integrity. Preventing cheating and erroneous payouts requires oversight and security processes that are impervious from manipulation. A lack of trust in the fairness of the horse racing or casino industries could have a material adverse impact on our operations.
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Our distributed gaming industry operations are located in markets where terminal revenue splits are either statutorily determined or negotiated. For our markets with negotiated splits, our revenue could be impacted by contract negotiations and our revenue in markets with statutory splits could decline if such jurisdictions move towards negotiated splits or reduce our statutory split.
In the distributed gaming industry, we generally operate in markets where our terminal revenue splits are either statutorily determined or negotiated. Our markets with statutory splits are Illinois, Georgia and Pennsylvania, while our markets with negotiated splits are Montana, Nevada, Nebraska, Iowa and Louisiana. For markets with statutory splits, net terminal income splits are statutorily predetermined and minimum and maximum wagers are mandated by the applicable governing bodies. If such governing bodies reduce our portion of net terminal income, this may have a material effect on our results of operations and our profit margin. For markets with negotiated splits, net terminal income splits are negotiated, which means pricing is the driver in contract negotiations as all revenue splits are negotiated. As our distributed gaming agreements expire, we are required to compete for renewals, and if we are unable to renew our agreements at the same split, this could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, if the governing bodies of markets with statutory splits determine to transition to or allow negotiated splits, our revenue may be subject to increasing uncertainty and we may face increased competition. Further, competitors in these markets have in the past, and may in the future, offer payment structures to operators or their affiliates that effectively create economics more favorable in the aggregate than the statutory splits, which may also impact our ability to renew agreements and compete successfully and adversely affect our results of operations.
Our results of operations are highly sensitive to discretionary consumer spending and broader macroeconomic and socio-political conditions; our concentration in Illinois, Montana and Nevada heightens exposure to local conditions.
Our revenue is largely driven by players’ disposable incomes and level of gaming activity at our location partners. Adverse macroeconomic and socio-political conditions—such as recession or economic slowdown, inflation or stagflation, rising interest rates, reduced liquidity and credit availability, labor shortages, instability in banking or financial markets, geopolitical conflicts or sanctions, civil unrest, terrorism or the threat thereof, reciprocal and increased tariffs and global sanctions, epidemics, pandemics or other public health issues—can decrease discretionary spending, reduce visit frequency and play levels, and negatively affect our business, results of operations, cash flows and financial condition. The current U.S. presidential administration has imposed new and increased tariffs on foreign goods, and foreign countries in turn have imposed tariffs on the U.S., which could increase costs for consumers. The actual or perceived impact of tariffs on consumer spending and inflation or an economic downturn or recession could lead to fewer customer visits and decreased discretionary spending by our customers. Additionally, these factors can impair location partners’ access to capital or operating liquidity, leading to closures or bankruptcies that diminish our footprint and revenue, and may contribute to volatility in equity markets that affects our cost of capital and financial flexibility. We cannot predict the timing, duration or magnitude of these conditions or their cumulative effect on consumer behavior or our partners.
We are further exposed to local and regional conditions because our operations are geographically concentrated, specifically in Illinois, Montana and Nevada. We are subject to similar concentration risks in Georgia, Iowa, Louisiana and Nebraska and any other gaming jurisdictions into which we expand, including Pennsylvania. Local economic trends and unemployment rates, changes in state and local gaming laws and regulations, competitive dynamics, demographic shifts, weather-related disruptions and other natural events, and changes affecting tourism or travel patterns can disproportionately impact our performance in those markets. Our dependence on local customer bases at location partners heightens these risks, and our planned Illinois casino and racing operations will increase our exposure to Illinois-specific conditions and regulatory developments. If Illinois, Montana or Nevada—or other states in which we operate, such as Georgia, Iowa, Louisiana, Nebraska, or Pennsylvania—experience adverse conditions to a greater degree than other regions, our results of operations, cash flows and financial condition could be more negatively affected than if our operations were more geographically diversified.
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O ur operations are largely dependent on the skill and experience of our management and key personnel, and the loss of management and other key personnel could negatively affect our business.
Our success and competitive position are largely dependent upon, among other things, the efforts and skills of our senior executives and management team. The loss of the services of these persons or other key personnel could deplete our institutional knowledge and could have an adverse effect on our business, financial condition, and results of operations. The market for these employees is competitive, and we could experience difficulty from time to time in hiring and retaining the personnel necessary to support our business.
We rely on assumptions and estimates to calculate certain key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We regularly review metrics, including the number of players and other measures, to evaluate growth trends, measure performance and make strategic decisions. Additionally, we commit significant amounts of resources and employee time to understanding the inherent historical patterns of gaming results within individual location partners. We use this pattern recognition process to implement more optimal gaming layouts for location partners, with the goal of generating increased gaming revenue.
Certain of our key business metrics, including number of locations, number of gaming terminals and other measures to evaluate growth trends and the quality of marketing and player behaviors, are calculated using data from Light & Wonder, Inc., a contractor of the Illinois Gaming Board (“IGB”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Business Metrics” for more information. While we believe these figures to be reasonable and that our reliance on them is justified, there can be no assurance that such figures are reliable or accurate. Should we decide to review these or other figures, we may discover material inaccuracies, including unexpected errors in our internal data that result from technical or other errors. If we determine that any of our metrics are not accurate, we may be required to revise or cease reporting such metrics and such changes may harm our reputation and business.
Our results of operations, cash flows and financial condition could be affected by natural disasters or other events outside our control in the locations in which we or our location partners, suppliers or regulators operate.
We may be impacted by severe weather and other geological events, which could potentially be exacerbated by climate change. For example, we could be impacted by fires, hurricanes, tornados, earthquakes or floods that could disrupt operations, including our Fairmount racino that holds outdoor events, or the operations of our location partners, suppliers, data service providers and regulators. Natural disasters or other disruptions at any of our facilities or suppliers’ facilities may impair or delay the operation, development, provisions or delivery of our products and services. Additionally, disruptions experienced by our regulators due to natural disasters or otherwise could delay the introduction of new products or entry into new jurisdictions where regulatory approval is necessary. While we insure against certain business interruption risks, there can be no assurance that such insurance will adequately compensate for any losses incurred as a result of natural or other disasters. Any serious disruption to our operations, or those of our location partners, suppliers, data service providers, or regulators, could have an adverse effect on our results of operations, cash flows and financial condition.
Our operations have historically been subject to seasonal fluctuations in operating results, and we can expect to experience such fluctuations in the future.
Our results of operations can fluctuate due to seasonal trends and other factors. For example, our operations in colder climates typically experience lower revenues in the summer when players typically spend less time indoors, and higher revenues in cold weather, specifically between February and April, when players will typically spend more time indoors. Our horse racing operations will only operate during the months where the weather is conducive to racing, which is typically from late spring through the early fall . In addition, the sports betting revenue we receive from our partnership with FanDuel may also experience seasonal fluctuations. Holidays, vacation seasons and sporting events may also cause our revenues to fluctuate. As a result, unfavorable seasonal conditions could have a material adverse effect on our business, financial condition and results of operations.
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Risks Related to Compliance and Regulatory Matters
We are subject to strict government regulations that are constantly evolving and may be amended, repealed, or subject to new interpretations, which may limit our existing operations, have an adverse impact on our ability to grow or may expose us to fines or other penalties.
We are subject to complex laws and regulations governing gaming and horse racing, including, but not limited to, the Illinois Video Gaming Act, the Illinois Horse Racing Act of 1975, the Pennsylvania Gaming Act, the Georgia Lottery for Education Act, the Montana Video Gaming Control Act, the Nevada Gaming Control Act and the Louisiana Gaming Control Law. These gaming laws and related regulations are administered by authorities with broad powers to create and interpret rules, investigate, enforce, impose sanctions, and approve transactions. We operate in highly regulated environments and are subject to responsible gaming, anti-money laundering, counter-terrorism financing, fraud detection, and other conduct requirements. In addition, we are subject to other rules and regulations related to our business and operations, including rules and regulations concerning the sale and service of food and alcoholic beverages.
Although we plan to maintain compliance with applicable laws as they evolve and to generally maintain good relations with regulators, there can be no assurance that we will do so. Law enforcement or gaming or other regulatory authorities have sought in the past, or may seek in the future, to restrict our business in their jurisdictions or to institute enforcement proceedings for alleged noncompliance. There can be no assurance that any instituted enforcement proceedings will be favorably resolved or that such proceedings will not have an adverse effect on our ability to retain and renew existing licenses or to obtain new licenses in other jurisdictions. Gaming authorities may levy fines against us or seize certain assets if we violate gaming regulations and the Illinois Racing Board may revoke or suspend our horse racing license for violation of the Illinois Horse Racing Act of 1975. Our reputation may also be damaged by any legal or regulatory investigation, regardless of whether we are ultimately accused of, or found to have committed, any violation. A negative regulatory finding or ruling in one jurisdiction could have adverse consequences in other jurisdictions, including with gaming regulators.
In addition to regulatory compliance risk, Illinois, Montana, Nevada or any other states or other jurisdictions in which we operate or may operate (including at the local level), may amend or repeal gaming or horse racing enabling legislation or regulations. Changes to gaming or horse racing enabling legislation or new interpretations of existing gaming or horse racing laws may hinder or prevent us from continuing to operate in the jurisdictions where we currently conduct business, which could increase operating expenses and compliance costs or decrease the profitability of operations. Repeal of gaming or horse racing enabling legislation could result in losses of capital investments and revenue, limit future growth opportunities and have an adverse effect on our results of operations, cash flows and financial condition. If any jurisdiction in which we operate were to repeal gaming or horse racing enabling legislation, there could be no assurance that we could sufficiently increase revenue in other markets to maintain operations or service existing indebtedness. In particular, the enactment of unfavorable legislation or government efforts affecting or directed at gaming terminal manufacturers or gaming operators, such as referendums to increase gaming taxes or requirements to use local distributors, or similar unfavorable legislation or government efforts affecting or directed at gaming or horse racing, would likely have a negative impact on our operations. For example, a number of municipalities in Illinois have adopted ordinances requiring the collection of additional taxes, the enforceability of which is currently being contested by the Illinois Gaming Machine Operators Association. We have paid a penalty with respect to an alleged violation in one municipality, see Note 20 Commitments and Contingencies, of the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K and have received notice of a potential violation from another municipality. Additionally, membership or policy changes within regulatory agencies could impact operations.
Our success depends on the security, integrity and regulatory compliance of our products, services and systems; technical incidents, cyber events, product defects or integrity failures could result in regulatory action, liability and reputational harm.
We believe that our success depends, in large part, on providing secure products, services and systems to locations and players, and on the ability to avoid, detect, replicate and correct software and hardware anomalies and fraudulent manipulation of products and services. Our business sometimes involves the storage, processing and transmission of proprietary, confidential and personal information, and any future player program we may institute will also involve such information. We also maintain
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certain other proprietary and confidential information relating to our business and personal information of our personnel. All of our products, services and systems are designed with security features to prevent fraudulent activity. Despite these security measures, our products, services and systems may be vulnerable to attacks by location partners, players, retailers, vendors or employees, or breaches due to cyber-attacks, viruses, malicious software, computer hacking, security breaches or other disruptions. Expanded use of the Internet and other interactive technologies may result in increased security risks for us and our location partners because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not foreseeable or recognized until launched against a target and we may be unable to anticipate these techniques or to implement adequate preventative measures. Furthermore, hackers and data thieves are becoming increasingly sophisticated and could operate large-scale and complex automated attacks. Moreover, the rapid evolution and increased adoption of artificial intelligence (“AI”) technologies may intensify our cybersecurity risks. Although we do not currently utilize AI to a significant extent in our operations, we are actively evaluating and expect to implement AI solutions in the near-to-medium term to enhance various aspects of our business. The integration of AI technologies into our operations could exacerbate the challenges discussed above and may introduce operational risks, including system failures, cybersecurity vulnerabilities, and potential disruptions to our business processes. While we believe the intentional and deliberate adoption of certain AI processes could provide long-term benefits, there is uncertainty regarding its successful implementation and the associated risks. Any security breach or incident could result in unauthorized access to, misuse of, or unauthorized acquisition of certain data, the loss, corruption or alteration of this data, interruptions in operations or damage to computers or systems or those of certain players or third-party platforms. Any of these incidents could expose us to claims, litigation, fines and potential liability. Our ability to prevent anomalies and monitor and ensure the quality and integrity of our products and services is periodically reviewed and enhanced, and we regularly assess the adequacy of security systems, including the security of our games and software, to protect against any material loss to location partners and players, as well as the integrity of our products and services and our games. However, these measures may not be sufficient to prevent future attacks, breaches or disruptions.
There is a risk that our products, services or systems may be used to defraud, launder money or engage in other illegal activities at its locations. Our gaming machines have also experienced anomalies in the past. Games and gaming machines may be replaced by us and other gaming machine operators if they do not perform according to expectations, or they may be shut down by regulators. The occurrence of anomalies in, or fraudulent manipulation of, our gaming machines or other products and services, may give rise to claims from players or location partners, may lead to claims for lost revenue and profits and related litigation by location partners and may subject us to investigation or other action by regulatory authorities, including suspension or revocation of licenses or other disciplinary action. In addition, in the event of the occurrence of any such issues with our products and services, substantial resources may be diverted from other projects to correct the issues, which may delay other projects and the achievement of strategic objectives.
Further, third party-hosted solution providers that provide services to us, such as Microsoft, Salesforce or NetSuite, have in the past been subject to cyber security incidents. Although these incidents have not had a material impact on our business, results of operations, financial condition or reputation to date, a future failure of these third parties’ security systems and infrastructure could adversely affect us.
We may be liable for product defects or other claims relating to our products that we provide to our location partners.
The products that we provide to our location partners could be defective, fail to perform as designed or otherwise cause harm to players or location partners. If any of the products we provide are defective, we may be required to recall the products and/or repair or replace them, which could result in substantial expenses and affect profitability. In the event of any repair or recall, we could be dependent on the services, responsiveness or product stock of key suppliers, and any delay in their ability to resupply or assist in servicing key products could affect our ability to maintain the gaming terminals in location partners. Any problem with the performance of our products could harm our reputation, which could result in a loss of existing or potential locations and players. In addition, the occurrence of errors in, or fraudulent manipulation of, our products or software may give rise to claims by location partners or by players, including claims by location partners for lost revenues and related litigation that could result in significant liability. Any claims brought against us by location partners or players may result in the diversion of management’s time and attention, expenditure of large amounts of cash on legal fees and payment of damages, lower demand for products or
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services, or injury to reputation. Our insurance or recourse against other parties may not sufficiently cover a judgment against us or a settlement payment, and any insurance payment is subject to customary deductibles, limits and exclusions. In addition, a judgment against us or a settlement could make it difficult for us to obtain insurance in the coverage amounts necessary to adequately insure our businesses, or at all, and could materially increase insurance premiums and deductibles. Software bugs or malfunctions, errors in distribution or installation of our software, failure of products to perform as approved by the appropriate regulatory bodies or other errors or malfunctions, may subject us to investigation or other action by gaming regulatory authorities, including fines.
Litigation may adversely affect our business, results of operations, cash flows and financial condition.
We are currently involved in several lawsuits. See Note 20, Commitments and Contingencies, of the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information. We may also become subject to litigation claims in the operation of our business, including, but not limited to, with respect to employee matters (including discrimination and harassment claims), alleged product and system malfunctions, alleged intellectual property infringement and claims relating to contracts, licenses, acquisitions and strategic investments. We may incur significant expense defending or settling any such litigation, and such claims may distract management’s attention from our core business operations or could harm our reputation with location partners, employees, investors and others. Additionally, adverse judgments that may be decided against us could result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct business, our results of operations, cash flows and financial condition.
If our estimates or judgments relating to accounting policies prove to be incorrect or financial reporting standards or interpretations change, our operating results could be adversely affected.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Significant assumptions and estimates used in preparing consolidated financial statements include among other things, the useful lives for depreciable and amortizable assets, income tax provisions, the evaluation of the future realization of deferred tax assets, projected cash flows in assessing the initial valuation of intangible assets in conjunction with business acquisitions, the initial selection of useful lives for depreciable and amortizable assets in conjunction with business acquisitions, contingencies, and the expected term of share-based compensation awards and stock price volatility when computing share-based compensation expense. Changes in assumptions could adversely affect results and our stock price. Additionally, changes in accounting standards or in interpretation thereof could require us to change our accounting policies or implement new systems to comply with new or amended accounting standards. Such changes may cause an adverse deviation from our revenue and operating profit target, which may negatively impact our results of operations, cash flows and financial condition.
Our business depends on the protection of trademarks and other intellectual property.
We believe that our success depends, in part, on protecting our intellectual property. Our intellectual property includes certain trademarks, service marks and trade names relating to our business, products and services. Our success may depend, in part, on our ability to obtain protection for these trademarks and other intellectual property rights. There can be no assurance that we will be able to build and maintain consumer value in our trademarks or other intellectual property or that any trademark or other intellectual property right will provide competitive advantages.
Despite our efforts to protect our proprietary rights, parties may infringe on our trademarks and our rights may be invalidated or unenforceable. Monitoring the unauthorized use of our intellectual property is difficult. Litigation may be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources. We cannot assure you that all of the steps we have taken to protect our trademarks will be adequate to prevent imitation of our trademarks by others. The unauthorized use or reproduction of our
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trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill, which could adversely affect our business.
We may not be able to capitalize on trends and changes in the gaming industries, including changes due to laws and regulations governing these industries, and efforts to curtail the expansion of legalized gaming, if successful, could limit our growth of operations.
We participate in new and evolving aspects of the gaming industries. These industries involve significant risks and uncertainties, including legal, business and financial risks. The fast-changing environment in these industries can make it difficult to plan strategically and can provide opportunities for competitors to grow their businesses at our expense. Consequently, our future results of operations, cash flows and financial condition may be difficult to predict and may not grow at expected rates.
Part of our strategy is to take advantage of the liberalization of regulations covering these industries on a municipality and state basis, which can be a protracted process. To varying degrees, governments have taken steps to change the regulation of gaming terminals through the implementation of new or revised licensing and taxation regimes.
Notwithstanding the general regulatory trend of liberalization, there also continues to be significant debate over, and opposition to, the gaming industry. There can be no assurance that this opposition will not succeed in preventing the legalization of gaming in jurisdictions where it is presently prohibited, prohibiting or limiting the expansion of gaming where it is currently permitted, including expansion of gaming terminals into additional types of establishments, or causing the repeal of legalized gaming in any jurisdiction. Such opposition could also lead these jurisdictions to adopt legislation or impose a regulatory framework to govern gaming that restricts our ability to advertise games or substantially increases costs to comply with these regulations. We continue to devote significant attention to monitoring these developments; however, we cannot accurately predict the likelihood, timing, scope or terms of any state or federal legislation or regulation relating to its business. Any successful effort to curtail the expansion of, or limit or prohibit, legalized gaming could have an adverse effect on our results of operations, cash flows and financial condition.
Risks Related to our Financial Condition
We may not have sufficient cash flows from operating activities, cash on hand and available borrowings under the New Credit Facility to finance our required capital expenditures under new gaming or amusement contracts and to meet our other cash needs.
Our business generally requires significant upfront capital expenditures for gaming terminals and amusement machines, software customization and implementation, systems and equipment installation and telecommunications configuration, and we often incur costs before we receive any revenue. In connection with the signing or renewal of a gaming or amusement contract, we may provide new equipment or impose new service requirements at a location, which may require additional capital expenditures in order to enter into or retain the contract. Historically, we have funded these upfront costs through cash flows generated from operations, available cash on hand and borrowings under our credit facility.
Our ability to generate revenue and to continue to procure new contracts will depend on, among other things, our liquidity levels or the availability of financing on commercially reasonable terms. If we do not have adequate liquidity or are unable to obtain any necessary financing for these upfront costs or other cash needs, we may be unable to pursue certain contracts, which could result in the loss of business or restrict our ability to grow. Moreover, we may not realize the return on investment that we anticipate on new or renewed contracts due to a variety of factors, including lower than anticipated retail sales or amounts wagered, higher than anticipated capital or operating expenses and unanticipated regulatory developments or litigation. We may not have adequate liquidity to pursue other aspects of our strategy, including bringing products and services to new location partners or new or underpenetrated geographies (including through equity investments) or pursuing strategic acquisitions. In the event we pursue significant acquisitions or other expansion opportunities, conduct significant repurchases of outstanding securities, or refinance or repay existing debt, we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings under our existing financing arrangements, which sources of funds may not necessarily be available on acceptable terms, if at all.
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Our level of indebtedness could adversely affect our results of operations, cash flows and financial condition.
As of December 31, 2025, we had total indebtedness of approximately $612 million, all of which was borrowed under the New Credit Facility (as defined herein), and we had approximately $288 million of availability. Our level of indebtedness could affect our ability to obtain financing or refinance existing indebtedness; require us to dedicate a significant portion of our cash flow from operations to interest and principal payments on indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, repurchases of our shares of Class A-1 common stock and other general corporate purposes; increase our vulnerability to adverse general economic, industry or competitive developments or conditions and limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate or in pursuing our strategic objectives. In addition, we are exposed to interest rate risk as a significant portion of our borrowings are at variable rates of interest. If interest rates increase, our interest payment obligations would increase even if the amount borrowed remained the same, and our results of operations, cash flows and financial condition could be negatively impacted. All of these factors could place us at a competitive disadvantage compared to competitors that may have less debt.
We may not have sufficient cash flows from operating activities to service all of our indebtedness and other obligations, and may be forced to take other actions to satisfy obligations, which may not be successful.
Our ability to make payments on and to refinance our indebtedness and other obligations depends on our results of operations, cash flows and financial condition, which in turn are subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to pay the principal, premium, if any, and interest on our indebtedness and other obligations. If we are unable to generate sufficient cash flow to pay our indebtedness, we may be required to adopt one or more alternatives, such as refinancing or restructuring indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. If we need to refinance all or part of our indebtedness at or before maturity, there can be no assurance that we will be able to obtain new financing or to refinance any of our indebtedness on commercially reasonable terms or at all.
Furthermore, our lenders, including the lenders participating in our revolving credit facility under the New Credit Facility, may become insolvent or tighten their lending standards, which could make it more difficult for us to borrow under our revolving credit facility or to obtain other financing on favorable terms or at all. Any default or failure by a lender in its obligation to fund its commitment under the revolving credit facility (or its participation in letters of credit) could limit our liquidity to the extent of the defaulting lender’s commitment and otherwise adversely affect us. In addition, borrowings under our existing revolving credit facility are subject to customary conditions precedent as set forth in the New Credit Facility.
The agreements governing our indebtedness impose certain restrictions that may affect the ability to operate our business. Failure to comply with any of these restrictions could result in the acceleration of the maturity of our indebtedness and require us to make payments on our indebtedness. Were this to occur, we may not have sufficient cash to pay our accelerated indebtedness.
The agreements governing our indebtedness impose, and future financing agreements are likely to impose, operating and financial restrictions on activities that may adversely affect our ability to finance future operations or capital needs or to engage in new business activities. In some cases, these restrictions require us to comply with or maintain certain financial tests and ratios.
The New Credit Facility contains customary affirmative and negative covenants including limitations on the ability of the Company, the Borrower, and their restricted subsidiaries to, amongst other things, grant additional liens, incur additional indebtedness, merge or consolidate, dispose of assets, engage in certain transactions with affiliates, and make restricted payments. The New Credit Facility also requires the Borrower to maintain, as of the last day of each fiscal quarter, (i) a First Lien Net Leverage Ratio (as defined in the New Credit Facility) no greater than 4.75 to 1.00 and (ii) a Fixed Charge Coverage Ratio (as defined in the New Credit Facility) of at least 1.20 to 1.00. The New Credit Facility includes customary events of default, the occurrence of which could permit the administrative agent to, amongst other things, declare all amounts owing under the credit facilities to be immediately due and payable, exercise remedies with respect to the collateral, and terminate the lenders’
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commitments thereunder. The failure to pay certain amounts owing under the New Credit Facility may result in an increase in the interest rate applicable thereto.
A breach of the covenants or restrictions under the agreements governing our indebtedness could result in an event of default under the applicable indebtedness. Such a default may allow our lenders to accelerate the related indebtedness, which may result in the acceleration of other indebtedness to which a cross-acceleration or cross-default provision applies. In addition, such lenders could terminate commitments to lend money, if any. In the event our lenders accelerate the repayment of our borrowings, we may not have sufficient assets to repay that indebtedness. There can be no assurance that we will be granted waivers or amendments to these agreements if for any reason we are unable to comply with these obligations or that we will be able to refinance our debt on terms acceptable or at all.
Risks Related to Our Common Stock
Clairvest Group Inc. (“Clairvest”) and members of the Rubenstein Family own a significant portion of Common Stock and have representation on the Board, which could limit the ability of other stockholders to influence corporate matters.
As of December 31, 2025, approximately 21% of the shares of our Class A-1 common stock was beneficially owned by affiliates of Clairvest. Following the consummation of the merger of TPG Pace Holding Corp. (“TPG”) and Accel Entertainment, Inc. (the “Business Combination”), one director was jointly nominated by TPG and Clairvest, Mr. Kenneth B. Rotman, and Mr. Rotman remains a member of the Board as a representative of Clairvest. In addition, as of December 31, 2025, approximately 10% of the shares of our Class A-1 common stock was beneficially owned by Mr. Andrew Rubenstein, approximately 1% of the shares of our Class A-1 common stock was beneficially owned by his brother, Mr. Gordon Rubenstein, and Mr. Andrew Rubenstein, together with Mr. Gordon Rubenstein (together, the “Rubenstein Family”) collectively beneficially own approximately 11% of the shares of our Class A-1 common stock. Although each of Mr. Andrew Rubenstein and Mr. Gordon Rubenstein disclaim legal or beneficial ownership of any shares of Class A-1 common stock owned or controlled by the others, the Rubenstein Family has and may exert significant influence over corporate actions requiring stockholder approval. In addition, each of Mr. Andrew Rubenstein and Mr. Gordon Rubenstein are members of the Board.
Accordingly, while our subsidiaries (including those holding gaming licenses) manage their respective operations in the ordinary course, each of Clairvest and the Rubenstein Family may be able to significantly influence the outcome of matters submitted for action by directors of the Board, subject to our directors’ obligation to act in the interest of all of our stockholders, and for stockholder action, including the designation and appointment of the Board (and committees thereof) and approval of significant corporate transactions, including business combinations, consolidations and mergers. So long as Clairvest or the Rubenstein Family continue to directly or indirectly own a significant amount of our outstanding equity interests and have Board representation, they may be able to exert substantial influence over us and may be able to exercise its influence in a manner that is not in the interests of our other stockholders. Clairvest’s and the Rubenstein Family’s influence over our management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our Class A-1 common stock to decline or prevent public stockholders from realizing a premium over the market price for our Class A-1 common stock. In addition, Clairvest and its affiliates are in the business of making investments in companies and owning real estate and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us or that supply us with goods and services. Clairvest or its affiliates may also pursue acquisition opportunities that may be complementary to (or competitive with) our business, and as a result those acquisition opportunities may not be available to us. Prospective investors should consider that the interests of Clairvest and the Rubenstein Family may differ from their interests in material respects. In addition, pursuant to a transaction agreement among TPG and the stockholders of Accel Entertainment, Inc. that was entered into in connection with the Business Combination, and subject to certain limitations set forth in the Transaction Agreement, any person who held (together with such person’s affiliates) at least 8% of the outstanding shares of Class A-1 common stock immediately following the closing of the Stock Purchase in connection with the Business Combination, had the right to nominate an individual to be a member of the Board. So long as any such stockholder with director nomination rights continues to directly or indirectly own a significant amount of our outstanding equity interests and any individuals affiliated with such stockholder are members of the Board and/or any committees thereof,
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such major stockholder may be able to exert substantial influence over us and may be able to exercise its influence in a manner that is not in the interests of our other stakeholders. This influence over our management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our Class A-1 common stock to decline or prevent public stockholders from realizing a premium over the market price for our Class A-1 common stock.
Holders of our Class A-1 common stock are subject to certain gaming regulations, and if a holder is found unsuitable by a gaming authority, that holder would not be able to, directly or indirectly, beneficially own our Class A-1 common stock.
Gaming regulators in Illinois, Georgia, Louisiana, Pennsylvania, Montana, Nevada and other jurisdictions may require disclosure, investigation, and qualification or suitability determinations for stockholders, particularly those who acquire beneficial ownership of more than 5% of voting securities of a gaming company. If a holder is found unsuitable by a gaming authority, that holder would not be able to, directly or indirectly, beneficially own our Class A-1 common stock. Gaming regulators have broad discretion to deny, limit, condition, restrict, revoke, or suspend approvals and to impose fines. Findings of unsuitability can prohibit direct or indirect ownership of our securities and may affect ability to affiliate with licensees in other jurisdictions.
The market price of our securities may be volatile, including as a result of future issuances of debt securities and equity securities, which may depress our stock price and be dilutive to existing stockholders.
The market price and trading volume of our Class A‑1 common stock can be volatile and may decline significantly due to factors such as our results versus expectations, changes in estimates, additions or departures of key personnel, regulatory or listing compliance matters, changes to gaming laws, research coverage, performance of peers, litigation, disruptions in financial markets, accounting matters, and other risks described in this Annual Report on Form 10‑K.
Future capital raises or balance‑sheet actions—including issuing debt, equity, or convertible/exchangeable securities that rank senior to, or have rights more favorable than, our existing securities—could increase leverage, impose restrictive covenants that limit operating flexibility, dilute existing stockholders, and adversely affect the trading price of our securities.
In addition, resales of our securities—including sales of Class A‑1 common stock registered for resale by certain shareholders in connection with the Business Combination— and any issuances of Class A‑1 upon exchange of Class A‑2 common stock—could increase volatility or depress the trading price of our securities. As contractual restrictions on resale end, the sale or possibility of sale of these shares could have the effect of increasing the volatility in the market price of our Class A-1 common stock or decreasing the market price itself.
Provisions in our Charter and Bylaws designate certain state and federal courts as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders or that arise under the Securities Act, which may discourage stockholders from bringing such claims.
Our Charter designates the Court of Chancery of the State of Delaware as the exclusive forum, to the fullest extent permitted by law and subject to exceptions outlined in the Charter, for certain actions brought on the Company’s behalf; asserting a claim of breach of a fiduciary duty owed by any of our directors or officers; asserting a claim arising pursuant to Delaware law, the Charter or the Bylaws, or asserting a claim governed by the internal affairs doctrine. Our Bylaws designate federal district courts as the exclusive forum for Securities Act claims. While these provisions do not waive compliance with federal securities laws or apply to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) claims, they may limit stockholders’ choice of forum, thereby discouraging lawsuits with respect to such stockholders’ claims. If a court finds a provision unenforceable, resolving actions in other forums could increase costs, which could harm our business, results of operations and financial condition.
