Light & Wonder, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion is intended to enhance the reader’s understanding of our operations and current business environment from management’s perspective and should be read in conjunction with the description of our business included under *Part I, Item 1 “*Condensed Consolidated Financial Statements” and *Part II, Item 1A “*Risk Factors” in this Quarterly Report on Form 10-Q and under *Part I, Item 1 “*Business,” *Item 1A “*Risk Factors” and *Part II, Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 10-K.

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be read in conjunction with the disclosures and information contained and referenced under “Forward-Looking Statements” and “Risk Factors” included in this Quarterly Report on Form 10-Q and “Risk Factors” included in our 2024 10-K. As used in this MD&A, the terms “we,” “us,” “our” and the “Company” mean L&W together with its consolidated subsidiaries.

BUSINESS OVERVIEW

We are a leading cross-platform global games company with a focus on content and digital markets. Our portfolio of revenue-generating activities primarily includes supplying game content and gaming machines, CMSs and table game products and services to licensed gaming entities, and electronic pull tabs and related services to charitable gaming entities; providing social casino and other online games, including casual gaming, to retail customers; and providing a comprehensive suite of digital gaming content, distribution platforms and player account management systems, as well as various other iGaming content and services.

As more fully described in *Part I, Item 1 “*Business” in our 2024 10-K, we are executing on our strategy to become a leading cross-platform global games company with a focus on content and digital markets. We report our results of operations in three reportable business segments—Gaming, SciPlay and iGaming—representing our different products and services. See “Business Segments Results” below and Note 3 for additional reportable segment information.

On May 16, 2025, we completed the acquisition of Grover for an upfront consideration of $850 million, subject to certain customary purchase price adjustments as set forth in the purchase agreement, and up to $200 million in cash in the aggregate in the form of contingent acquisition consideration payments based on achievement of certain revenue metrics over a four-year period. Grover is a leading provider of electronic pull-tabs currently distributed over five U.S. states: North Dakota, Ohio, Virginia, Kentucky and New Hampshire. The Grover operating segment was aggregated with our Gaming reportable business segment.

On May 15, 2025, LNWI borrowed an aggregate principal amount of $800 million in term loans under its LNWI Term Loan A facility maturing in May 2028, the proceeds of which were used to complete the Grover acquisition and pay fees and expenses related thereto. On September 24, 2025, we extended our debt maturities and decreased our interest rate by issuing $1.0 billion in aggregate principal amount of 6.250% senior unsecured notes due 2033, the net proceeds of which were used to redeem all $700 million of the 2028 Unsecured Notes, pay all outstanding borrowings under the LNWI Revolver and pay accrued and unpaid interest thereon plus related fees and expenses, with any remaining proceeds used for general corporate purposes, which may include repurchases of the Company’s equity.

We delivered a solid quarterly performance, highlighted by earnings and operating cash flows growth based on strong execution and game performance, while continuing to advance our robust content roadmap and cross-platform strategy. Consolidated revenue for the three months ended September 30, 2025 increased by 3% to $841 million, and it increased slightly to $2.4 billion for the nine months ended September 30, 2025, as compared to the prior year periods.

For the year-to-date period ended October 31, 2025, we returned $477 million (excluding excise tax) to shareholders through share repurchases and completed approximately 51% of our $1.5 billion share repurchase plan that was authorized in June 2024 and increased in July 2025.

As previously announced, we are in the process of moving from our current dual listing on Nasdaq and the ASX to a sole primary listing on the ASX, which is expected to take effect on November 13, 2025 (ET) and entails the conversion from an ASX Foreign Exempt Listing to an ASX Standard Listing (the “ASX Transition”). The ASX Transition, including the timetable thereof, remains subject to the ASX granting waivers and confirmations with respect to various conditions and other applicable U.S. and Australian regulatory, and other third-party, approval and processes.

In April of 2025, the U.S. government and many foreign countries imposed a series of new trade tariffs and other changes in trade policy. In addition, in response to these tariffs, other countries have implemented retaliatory tariffs and other measures impacting U.S. goods. These tariffs place additional duties on imports, and we currently source a portion of the raw materials and components for our Gaming business from China and across Asia. We have evaluated various mitigation strategies, including but not limited to, supplier diversification, adjusting supply chain operations, supplier pricing negotiations and cost control initiatives, among other measures. Over the past several quarters, through margin enhancement initiatives, we have also successfully executed meaningful operational efficiencies. While we expect recent tariffs and trade policies to continue to create incremental cost pressures in the near term, our realized and ongoing operational efficiency initiatives coupled with other measures are expected to significantly mitigate these effects. Additionally, as described above, overall macroeconomic uncertainty, including tariffs, is impacting some of our customers and their game replacement cycle as they are being more cautious on the timing of their capital expenditures. The full impact of the tariffs on our financial results will depend on several factors, including the duration and magnitude of the trade measures, our customer behavior and timing of capital expenditures, overall market conditions and our ability to successfully execute our mitigation strategies.

CONSOLIDATED RESULTS

($ in millions)

Revenue

Gaming revenue increased 4% and 2% for the three and nine months ended September 30, 2025, respectively, as compared to the prior year periods. Revenue growth for both periods was primarily driven by higher Gaming operations revenue driving an increase of $26 million and $48 million for the three and nine months ended September 30, 2025, respectively, supported by our diversified portfolio of high-performing game franchises, along with $40 million and $61 million in revenue from Grover, respectively.

SciPlay revenue decreased 4% and 3% for the three and nine months ended September 30, 2025, respectively, as compared to the prior year periods, due to a decline in average monthly payers primarily attributable to JACKPOT PARTY® Casino, partially offset by an increase in average monthly revenue per paying user, which increased 11% and 8% for the three and nine months ended September 30, 2025, respectively. Revenue generated via the proprietary direct-to-consumer platform continues to increase and represented approximately 20% and 17% of total SciPlay revenue for the three and nine months ended September 30, 2025, respectively.

iGaming revenue increased 16% and 10% for the three and nine months ended September 30, 2025, respectively, driven primarily by continued momentum in the North American markets underpinned by first-party content (“1PP”) proliferation and the expansion of our partner network.

Operating Expenses

($ in millions)

Cost of Revenue

Total cost of revenue decreased 12% and 8% for the three and nine months ended September 30, 2025, respectively, primarily as a result of lower cost of products in correlation with lower gaming machine sales revenue.

SG&A

SG&A decreased $13 million for the nine months ended September 30, 2025, as compared to the prior year period. The change was primarily driven by lower SciPlay user acquisition costs of $9 million.

D&A

D&A increased 20% and 13% for the three and nine months ended September 30, 2025, respectively, primarily due to depreciation related to Gaming operations installed base investments and growth, as well as D&A associated with assets acquired from the Grover acquisition.

Restructuring and Other

Restructuring and other decreased for the three and nine months ended September 30, 2025, primarily due to $34 million and $66 million associated with charges related to certain legal matters in the three and nine months ended September 30, 2024, respectively, partially offset by an increase in costs related to strategic review and related transactions for the nine months ended September 30, 2025, including legal and professional service fees associated with the acquisition of Grover of $14 million and $10 million in iGaming charges primarily related to the discontinuation of our iGaming Live Casino operations.

Other Factors Affecting Net Income

(in millions)

Foreign Currency Exchange (F/X)

Our results are impacted by changes in foreign currency exchange rates used in the translation of foreign functional currencies into USD and the re-measurement of foreign currency transactions or balances. The impact of foreign currency exchange rate fluctuations represents the difference between current rates and prior-period rates applied to current activity. Our exposure to foreign currency volatility on revenue is as follows:

($ in millions)

REPORTABLE BUSINESS SEGMENT RESULTS (for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024)

GAMING

Our Gaming business segment designs, develops, manufactures, markets and distributes a comprehensive portfolio of gaming content, products and services. We provide our Gaming portfolio of products and services to commercial casinos, Native American casinos, wide-area gaming operators such as LBOs, arcade and bingo operators in the U.K. and continental Europe, charitable organizations, and government agencies and their affiliated operators.

We generate Gaming revenue from both services and product sales. Our services revenue includes revenue earned from Participation gaming machines, other leased gaming machines (including VLTs and electronic table games), supplied table products and services (including Shufflers), casino management technology solutions and systems, and other services revenues. Our product sales revenue includes the sale of new and used gaming machines, electronic table games, VLTs and VGTs, casino-management technology solutions and systems, table products, proprietary table game licensing, conversion kits (including game, hardware or operating system conversions) and spare parts.

Grover revenues are generated by providing charitable gaming entities with access to proprietary electronic pull tabs equipment, content and related offerings that allow charities to maximize their funding and for which Grover is compensated based upon a revenue participation model. Grover currently operates in five states (as described above) with over 11,250 active units and 1,500 locations and is well positioned to capitalize on future expansion and legalization of charitable gaming.

For additional information, refer to the Gaming primary business activities summary included within “Business Segment Results” under Item 7 of our 2024 10-K.

Current Year Update

Gaming revenue for the three months ended September 30, 2025 increased by 4%, primarily driven by growth in Gaming operations revenue of 38%, which benefited from a $26 million, or 15%, increase supported by our diversified portfolio of high-performing game franchises along with $40 million in Grover revenue contributions. Gaming revenue for the nine months ended September 30, 2025 increased by 2% as compared to the prior year period. The change in Gaming revenue also benefited from Table products growth of 6% and 5% for the three and nine months ended September 30, 2025, respectively.

Our growth is driven by the continued strength and success of our diversified portfolio of successful game franchises, including KONG: SKULL ISLAND, HUFF N’ PUFF®, ULTIMATE FIRE LINK®, INVADERS! ATTACK FROM THE PLANET MOOLAH®, FRANKENSTEIN, our hit Asian-themed games 88 FORTUNES® and DANCING DRUMS®, stepper favorites QUICK HIT® and BLAZING 777® and the success of our COSMIC®, COSMIC UPRIGHT and HORIZON® cabinets. We are actively monitoring any impact of recent tariffs, inflationary pressures, supply chain disruptions and macroeconomic uncertainty that may impact our operations and financial results. See the “Business Overview” section above and *Item 1A “*Risk Factors” for information regarding recent trade tariffs which may have a significant impact on our Gaming business.

Results of Operations and KPIs

Three and Nine Months Ended September 30, 2025 and 2024

($ in millions, except per unit amounts)

37

Gaming Operations

Gaming operations revenue growth for the three months ended September 30, 2025 was driven by a $26 million, or 15%, increase driven by strong game performance of hit franchises, including our premium games, as well as a contribution of $40 million in revenue from Grover. For the nine months ended September 30, 2025, these drivers impacted revenue growth by $48 million and $61 million, respectively. Gaming operations for the U.S. and Canada (excluding Grover) had a 2,834-unit increase in installed base from the prior year period end, while Grover had an 11,255-unit active installed base as of September 30, 2025. Gaming operations (including Grover) had a decrease in average daily revenue per unit of $3.70 and $2.65 for the three and nine months ended September 30, 2025, respectively, as growth related to our existing U.S. and Canada units was offset by the inclusion of lower-yielding Grover units. Average daily revenue per unit for International units increased by $1.08 and $0.93 for the three and nine months ended September 30, 2025, respectively. International ending installed base units decreased by 1,932 units from September 30, 2024 to September 30, 2025, primarily due to the expected closure of certain LBOs in the U.K. and the reduction of certain low-yielding units in Latin America.

Gaming Machine Sales

Gaming machine sales revenue for both periods decreased primarily due to the timing of international game sales, including overall more cautious purchasing behavior and delayed capital expenditure among some of our customers.

The following table summarizes Gaming machine sales changes:

Operating Expenses and AEBITDA

Operating expenses increased by $8 million and $23 million for the three and nine months ended September 30, 2025, respectively, as compared to the corresponding prior year periods, primarily due to $22 million and $44 million, respectively, in higher D&A, of which $15 million and $25 million, respectively, is related to Grover, and the remainder of which is related to increased Gaming operations investment, coupled with $5 million and $24 million, respectively, in higher salaries and benefits (including stock-based compensation), partially offset by lower cost of revenue.

AEBITDA increased by $38 million and $68 million for the three and nine months ended September 30, 2025, respectively, which is primarily related to margin expansion and a contribution from Grover since the acquisition closed in May 2025. AEBITDA as a percentage of revenue (“AEBITDA margin”) increased to 55% and 53% for the three and nine months ended September 30, 2025, respectively, as compared to 50% for both corresponding prior year periods, driven by a more favorable revenue mix, margin enhancements initiatives, Grover contributions and the impact of our incentive compensation payout structure.

SCIPLAY

Our SciPlay business segment is a leading developer and publisher of digital games on online platforms. SciPlay operates primarily in the social gaming market, which is characterized by gameplay online or on mobile devices that is social, competitive and self-directed in pace and session length. SciPlay generates a substantial portion of its revenue from in-app purchases in the form of coins, chips and cards, which players can use to play slot games, table games or bingo games. Players who install SciPlay’s social games typically receive free coins, chips or cards upon the initial launch of the game and additional free coins, chips or cards at specific time intervals. Players may exhaust the coins, chips or cards that they receive for free and may choose to purchase additional coins, chips or cards in order to enhance gameplay. Once obtained, coins, chips and cards (either free or purchased) cannot be redeemed for cash nor exchanged for anything other than game play within SciPlay’s apps. SciPlay generates additional revenue through advertising arrangements in certain games, which was not material for the periods presented. Players who install these games receive free, unlimited gameplay that requires viewing of periodic in-game advertisements.

SciPlay currently offers a variety of social casino games, including JACKPOT PARTY® Casino, QUICK HIT® Slots, GOLD FISH® Casino, 88 FORTUNES® Slots, MONOPOLY Slots and HOT SHOT CASINO®. SciPlay continues to pursue its strategy of expanding into the online games market. Current casual game titles include BINGO SHOWDOWN® and BACKGAMMON LIVE. SciPlay continually develops and tests various new games. SciPlay’s social casino games typically include slots-style game play and occasionally include table games-style game play, while its casual games blend solitaire-style or bingo game play with adventure game features. All of SciPlay’s games are offered and played across multiple platforms, including APPLE, GOOGLE, FACEBOOK, AMAZON and MICROSOFT. SciPlay launched a proprietary direct-to-consumer in-app purchase platform during 2023, with the goals of improving players’ experience and reducing costs of revenue given the lower payment processing fees and other related expenses for in-app purchases made through the proprietary platform, as compared to the platform fee charged by third-party platforms. Revenue generated via the proprietary direct-to-consumer platform continues to increase and represented approximately 17% of total SciPlay revenue for the nine months ended September 30, 2025. In addition to original game content, SciPlay’s content library includes recognizable game content across our other platforms within Gaming and iGaming. This content allows players who like playing land-based game content to enjoy some of those same titles in SciPlay’s free-to-play games.

Current Year Update

SciPlay continues to deliver steady results and quality payer engagement and monetization. Revenue decreased by 4% and 3% for the three and nine months ended September 30, 2025, respectively, which was primarily due to a decline in average monthly payers, primarily attributable to Jackpot Party® Casino, partially offset by an increase in average monthly revenue per paying user. Additionally, the overall social casino industry is experiencing pressures from sweepstakes operators. SciPlay continues to deploy strategic game updates, utilize enhanced analytics, pursue international expansion and benefit from the proprietary direct-to-consumer platform.

We have a significant portion of SciPlay personnel located in Tel Aviv, Israel. In light of current circumstances in Israel, we are actively monitoring developments and are ready to redirect resources as needed to minimize impact on SciPlay operations. We do not have servers or infrastructure that are located in Israel that host our games. While we have not yet seen an impact on our business from current events, they could negatively affect the performance of the personnel in that area and have an adverse impact on our business if these events continue and/or escalate.

Results of Operations and KPIs

Three and Nine Months Ended September 30, 2025 and 2024

(1) Other primarily represents advertising revenue, which was not material for the periods presented.

(in millions unless otherwise noted)

SciPlay revenue decreased by 4% and 3% for the three and nine months ended September 30, 2025, respectively, primarily due to a decline in average monthly payers, primarily attributable to Jackpot Party® Casino and partially offset by an increase in average monthly revenue per paying user.

Average MAU and average MPU for the three and nine months ended September 30, 2025 decreased due to the turnover in users. ARPDAU increased as a function of higher player monetization with a slight decrease in average DAU. AMRPPU increased, despite payer conversion decreasing slightly, as SciPlay continues to improve content and features, resulting in steady paying player interaction.

Payer conversion rates decreased slightly but remained near 10% due to consistent payer interaction with the games as a result of SciPlay’s focus on introducing new content, features and live events in games.

Operating Expenses and AEBITDA

Operating expenses decreased 11% and 7% for the three and nine months ended September 30, 2025, respectively, as compared to the prior year periods, which was primarily driven by lower cost of revenue due to higher margins on our direct-to-consumer platform revenue, lower salaries and benefits (including stock-based compensation) of $5 million and $12 million, respectively, and lower user acquisition costs of $5 million and $9 million, respectively.

AEBITDA for the three and nine months ended September 30, 2025 increased by $5 million and $11 million, respectively, and AEBITDA margin increased by 4 percentage points to 36% and 3 percentage points to 35%, respectively, primarily due revenue generated via our proprietary direct-to-consumer platform, which generates higher margins.

iGAMING

Our iGaming business segment provides a comprehensive suite of digital gaming content, distribution platforms and player account management systems, as well as various other iGaming content and services. The majority of our revenue is derived from casino-style game content, including a wide variety of internally developed and branded games as well as popular third-party provider games. These games are made available to iGaming operators via content aggregation platforms, including Open Gaming System, remote gaming servers and various other platforms. We also provide our Open Platform System, a player account management system which offers a wide range of reporting and administrative functions and tools providing operators full control over all areas of digital gaming operations. Generally, we host the play of our game content which is integrated with the online casino operators’ websites.

Current Year Update

We continue to expand our customer base and capitalize on growth in the North American and International markets, including emerging markets, by leveraging our industry leading platforms, content and solutions, as well as investing in our ability to scale our own original U.S. and international land-based content offering.

Following the decision made in the first quarter of 2025, the Company has continued to execute on the discontinuation of its Live Casino operations. This reflects our commitment to reallocate resources to maximize our return on investments, and we do not expect that this decision will have a material impact on our iGaming business’s long-term growth prospects.

Results of Operations

Three and Nine Months Ended September 30, 2025 and 2024

iGaming revenue for the three and nine months ended September 30, 2025 increased 16% and 10%, respectively, as compared to the prior year periods, primarily driven by continuing momentum in the North American market underpinned by 1PP growth and the expansion of our partner network. Wagers processed through our Open Gaming System for the current year periods increased to $28.0 billion and $79.8 billion, respectively.

Operating expenses increased 2% for the nine months ended September 30, 2025 in correlation with the increase in revenue and also due to $10 million in restructuring costs, largely related to the discontinuation of our Live Casino operations, partially offset by decreases in intangible asset amortization expense and salaries and benefits expense. AEBITDA increased 42% and 22% for the three and nine months ended September 30, 2025, respectively, and AEBITDA margin increased to 40% and 36% for the three and nine months ended September 30, 2025, respectively, primarily due to lower operating expenses (excluding cost of revenue and R&O) and higher margin on 1PP.

RECENTLY ISSUED ACCOUNTING GUIDANCE

We do not expect that any recently issued accounting guidance will have a significant effect on our consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES

For a description of our policies regarding our critical accounting estimates, see “Critical Accounting Estimates” in *Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 10-K.

There have been no significant changes in our critical accounting estimate policies or the application of those policies to our condensed consolidated financial statements from those presented in *Item 7 “*Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 10-K, except as set forth below.

Business Combinations and Goodwill Update

We have estimated the economic lives of certain acquired assets in connection with the Grover acquisition, and these lives are used to calculate D&A expense. If our estimates of the economic lives change, D&A expense could be accelerated or slowed. For example, if the Grover intangible assets useful lives were extended by two years, the total annual depreciation and amortization would decrease by approximately $7 million, and if the useful lives were shortened by two years, the total annual depreciation and amortization would increase by approximately $14 million. See Note 1 for additional details.

After the acquisition of Grover, we have now determined that we have seven reporting units: Gaming, Grover, U.K. Gaming, Casino Management Systems, Table Products, SciPlay and iGaming. There have been no other changes to our goodwill impairment testing policy. We test goodwill for impairment at the reporting unit level (operating segment or one level below an operating segment) on October 1 or sooner if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. No such events or circumstances have occurred as of September 30, 2025, or through the date of this report.

LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL

Cash and Available Liquidity

As of September 30, 2025, our principal sources of liquidity, other than cash flows provided by operating activities, were cash and cash equivalents as well as amounts available under the LNWI Revolver.

Cash and Available Revolver Capacity

(in millions)

Total cash held by our foreign subsidiaries was $164 million and $127 million as of September 30, 2025 and December 31, 2024, respectively. We believe that substantially all cash held outside the U.S. is free from legal encumbrances or similar restrictions that would prevent it from being available to meet our global liquidity needs.

Our Gaming operations generally require significant upfront capital expenditures, and we may need to incur additional capital expenditures in order to retain or increase market share and continue our product investments. For certain game sales in which control of the units have transferred to a customer, but the title transfer is pending until the final payment is made, we have elected to designate future collections as restricted cash until the resolution of the Aristocrat legal matter (for additional information on our legal proceedings, see Note 15 in this Form 10-Q and Note 19 in our 2024 Form 10-K). Other capital requirements for the near term primarily include debt principal and interest payments and also include purchase obligations and supply contracts, license agreement minimum guaranteed payments and lease obligations. There have been no material changes to our capital requirements disclosed in our 2024 10-K, other than those associated with our amended credit facility and changes to our debt issuance, as described below and in Note 10.

Our ability to make payments on and to refinance our indebtedness and other obligations depends on our ability to generate cash in the future. We may, from time to time, repurchase or otherwise repay, retire or refinance our debt, through our subsidiaries or otherwise. In the event we pursue significant acquisitions or other expansion opportunities, or conduct significant repurchases of our outstanding securities, we may need to raise additional capital. If we do not have adequate liquidity to support these activities, we may be unable to obtain financing for these cash needs on favorable terms or at all. For additional information regarding our cash needs and related risks, see “Risk Factors” under Part I, Item 1A in our 2024 10-K.

On June 11, 2024, our Board of Directors approved a share repurchase program, and on July 31, 2025, our Board of Directors increased the share repurchase program, under which the Company is authorized to repurchase, from time to time through June 12, 2027, up to an aggregate amount of $1.5 billion of shares of outstanding common stock. For the year-to-date period ended October 31, 2025, we repurchased approximately 5.6 million shares of common stock at an aggregate cost of $481 million (including excise tax).

On February 10, 2025, we amended the LNWI Credit Agreement. The amendment, among other things, (i) provided for new revolving commitments under the LNWI Revolver in an amount of $1.0 billion, which replaced the existing revolving commitments (which were in an amount of $750 million), (ii) extended the maturity of the revolving commitments and (iii) reduced the applicable margin for the revolving loans by up to 50 basis points.

On May 15, 2025, LNWI entered into the LNWI Credit Agreement A, pursuant to which LNWI borrowed an aggregate principal amount of $800 million in term loans under the LNWI Term Loan A facility. The proceeds of the loans were used to complete the Grover acquisition and pay fees and expenses related thereto. Loans under the LNWI Term Loan A will mature on May 15, 2028 and, beginning with the first fiscal quarter ending on September 30, 2025, will amortize in quarterly installments in aggregate amounts equal to: (i) for the first four full fiscal quarters following the TLA Closing Date,

0.625% of the aggregate principal amount of the LNWI Term Loan A funded on the TLA Closing Date and (ii) for each fiscal quarter following the fourth full fiscal quarter following the TLA Closing Date, 1.25% of the aggregate principal amount of such LNWI Term Loan A funded on the TLA Closing Date, with any outstanding balance due and payable at maturity.

On September 24, 2025, we issued $1.0 billion in aggregate principal amount of 6.250% senior unsecured notes due 2033 and received net proceeds of $988 million, which were used to redeem all $700 million of the 2028 Unsecured Notes, pay all outstanding borrowings under the LNWI Revolver and pay accrued and unpaid interest thereon plus related fees and expenses. The 2033 Unsecured Notes bear interest at the rate of 6.250% per annum, which accrues from September 24, 2025 and is payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2026. See Note 10 for further details on our long-term debt.

Cash Flow Summary

(in millions)

Cash flows from operating activities

(in millions)

Net cash provided by operating activities increased primarily due to a $162 million increase in earnings (drivers of which are described above), partially offset by changes in working capital accounts. Changes in working capital accounts for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 were negatively impacted by the $73 million TCS John Huxley legal matter settlement payment and $18 million in higher interest payments, coupled with the timing of collection of receivables and increased inventory levels.

Cash flows from investing activities

Net cash used in investing activities increased primarily due to the Grover acquisition, partially offset by lower capital expenditures related to the timing of investments in Gaming operations. Capital expenditures are composed of investments in gaming operations, systems, equipment and other assets related to contracts, property and equipment, intangible assets and software.

Cash flows from financing activities

Net cash provided by financing activities increased, primarily driven by $1.8 billion of borrowings incurred under the LNWI Term Loan A and 2033 Unsecured Notes, net of $700 million used to redeem the 2028 Unsecured Notes. We also purchased more of our outstanding common stock under our share repurchase programs. During the nine months ended September 30, 2025 and 2024, we paid (including excise tax) $380 million and $219 million, respectively, to purchase our common stock.

Credit Agreement and Other Debt

For additional information regarding the LNWI Credit Agreement and other debt, interest rate risk and interest rate hedging instruments, see Notes 14 and 15 and *Item 7A “*Quantitative and Qualitative Disclosures About Market Risk” in our 2024 10-K as well as Notes 10 and 11 and Item 3 below in this Form 10-Q.

Off-Balance Sheet Arrangements

As of September 30, 2025, we did not have any significant off-balance sheet arrangements.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign exchange rates and commodity prices. The following describes our financial instruments which expose us to market risk.

Interest Rate Risk

As of September 30, 2025, the face value of long-term debt was $5.0 billion, including $2.9 billion of variable rate obligations that fluctuate based on SOFR. Assuming a constant outstanding balance for our variable-rate long-term debt and excluding the impact of interest rate swap contracts, a hypothetical 1% change in interest rates would result in interest expense changing by approximately $29 million. All of our interest rate sensitive financial instruments are held for purposes other than trading.

In April 2022, we entered into interest rate swap contracts to hedge a portion of our interest expense associated with our variable rate debt and effectively fix the interest rate that we pay. The objective of our interest rate swap contracts, which are designated as cash flow hedges of the future interest payments, is to eliminate the variability of cash flows attributable to the SOFR component of interest expense to be paid on a portion of our variable rate debt. These hedges mature in April 2027.

For additional information regarding our long-term debt and interest rate swap contracts, see Notes 10 and 11, respectively.

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 3a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of September 30, 2025.

In May 2025, we completed the Grover acquisition (see Note 1). We are in the process of integrating Grover and our internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be revised. There were no other changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, there have been no material changes in our risk factors from those disclosed under *Item 1A “*Risk Factors” included in our 2024 10-K.

Unfavorable U.S. and international economic conditions, decreased discretionary spending, travel or operational disruptions due to other factors such as inflation, rising benchmark interest rates, new or increased trade tariffs, terrorist activity or threat thereof, armed conflicts or hostilities, civil unrest, health epidemics, contagious disease outbreaks, or public perception thereof, other economic or political uncertainties, or other events beyond our control have adversely affected and may in the future adversely affect our business, results of operations, cash flows and financial condition.

Unfavorable economic conditions, including recession, inflation, rising benchmark interest rates, economic slowdown, decreased liquidity in the financial markets, decreased availability of credit, relatively high rates of unemployment and inflation, have had, and may continue to have, a negative effect on our business. Sociopolitical factors such as terrorist activity or threat thereof, armed conflicts or hostilities, civil unrest or other economic or political uncertainties, or health epidemics, contagious disease outbreaks, or public perception thereof, or other events beyond our control that contribute to consumer unease have resulted, and may continue to result, in decreased discretionary spending or travel by consumers and have had, any may continue to have, a negative effect on our businesses. Such factors out of our control may also have effects beyond discretionary spending or travel, such as disruptions to our operations and productivity, which could also have a negative effect on our businesses. Prolonged or more severe economic weakness, particularly from inflation, rising interest rates, new or increased tariffs and foreign currency volatility, could materially adversely impact our business, including causing our expected expenses to increase materially. We cannot fully predict the effects that unfavorable social, political and economic conditions, economic uncertainties and public health crises and any resulting decrease in discretionary spending or travel would have on us, as they would be expected to impact our customers, suppliers, employees, consultants and business partners in varied ways.

In our Gaming business, especially our Participation gaming business, our revenue is largely driven by players’ disposable incomes and level of gaming activity which may be reduced by unfavorable economic conditions. A further or extended decline in disposable income may result in reduced play levels on our Participation gaming machines, causing our results of operations and cash flows from these products to decline. Additionally, higher travel and other costs may adversely affect the number of players visiting our customers’ casinos. Adverse changes in discretionary consumer spending or consumer preferences, resulting in fewer patrons visiting casinos and reduced play levels, could also be driven by factors such as an unstable job market, recession, new or increased tariffs, outbreaks of contagious diseases or public perception thereof or fears of terrorism or other violence. A decline in play levels has negatively impacted the results of operations, cash flows and financial condition of our casino customers and their ability to purchase or lease our products and services.

Unfavorable economic conditions have also impacted, and could continue to impact, the ability of our Gaming customers to make timely payments to us. These conditions, and the concentration of certain outstanding Gaming segment receivables, may increase our collection risks and materially impact our estimate of receivables allowance for credit losses. In addition, unfavorable economic conditions have caused, and may cause in the future, some of our Gaming customers to temporarily close gaming venues or ultimately declare bankruptcy, which adversely affects our business. Further, our Gaming customers could elect to modify their replacement cycles or otherwise delay purchases and capital expenditures they would have otherwise made. Unfavorable economic conditions may also result in volatility in the credit and equity markets. The difficulty or inability of our customers to generate or obtain adequate levels of capital to finance their ongoing operations may reduce their ability to purchase our products and services.

In our iGaming business based on a Participation model, our revenue is largely driven by disposable incomes and level of player activity. Unfavorable economic conditions have previously reduced and may later reduce the disposable incomes of end users consuming the services, which could negatively impact revenues for the iGaming business. Suppliers to our iGaming business may suffer financial difficulties and may not be able to offer their services and products, which could restrict the provision of our services and negatively impact our revenues. Various gambling regulators have implemented additional responsible and safer gambling measures relating to online casinos, including the implementation of bet limits, spin speeds, deposit limits and bonusing, which could negatively impact our revenues, particularly if additional gambling regulators follow suit or additional measures are introduced.

In our SciPlay business, while we maintain offices in the U.S., we have employees and consultants operating in foreign jurisdictions, including Israel. In the foreign jurisdictions in which SciPlay operates, conditions such as political instability, inflation, slower growth or recession, new or increased tariffs, terrorist activity or threat thereof, armed conflicts or hostilities and civil unrest could adversely affect our business and results of operations. For example, political, economic and military conditions in Israel, including acts of terrorism, war or other armed conflicts, which have impacted our employees and operations in Israel, could in the future cause business interruptions or other spillover effects that could materially adversely affect SciPlay’s business and results of operations.

Additionally, in our Gaming business, we monitor for any potential disruptions in our supply chain, such as those due to health epidemics, contagious disease outbreaks, or public perception thereof, terrorist activity or threat thereof, armed conflicts or hostilities, civil unrest or other economic or political uncertainties, or other events beyond our control, and we may be required to increase our inventory positions when deemed necessary to mitigate any expected or unexpected delays and fulfill customer orders timely. The current conflict in Israel has delayed passage of supplier vessels through the Red Sea and could require us to increase our inventory positions and/or could result in higher holding and freight costs, which could adversely impact our operations and/or gross margin.

There are ongoing concerns regarding the debt burden of certain countries, particularly in Europe and South America, and their ability to meet their future financial obligations, which have resulted in downgrades of the debt ratings for these countries. We currently operate in, and our growth strategy may involve pursuing expansion or business opportunities in certain of these jurisdictions, such as Argentina, Brazil, Greece, Italy and Puerto Rico among others. These sovereign debt concerns, whether real or perceived, could result in a recession, prolonged economic slowdown, or otherwise negatively impact the general health and stability of the economies in these countries or more broadly. In more severe cases, this could result in a limitation on the availability or flow of capital, thereby restricting our liquidity and negatively impacting our results of operations, cash flows and financial condition.

Changes in international trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results, and financial condition.

The U.S. government has adopted new approaches to trade policy and in some cases, may renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreement. The U.S. government has also imposed tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other countries and types of foreign goods. In addition, in response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods.

We cannot yet predict the full effect of the recently imposed U.S. tariffs on imports, or the extent to which other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of materials in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. As we currently source a portion of our Gaming Business raw materials and components from China and across Asia, any additional duties imposed on imports may materially impact our supply chain by making it more difficult or costly to procure these items. Potential adverse impacts on our operating results include increased costs for our products and disruptions in our manufacturing and supply. The overall impact of trade policy and laws on our business depends on multiple factors, including their duration, their scope and its potential expansion, enforcement, retaliatory measures by impacted exporting countries, inflationary effects and broader macroeconomic responses, changes to consumer purchasing behavior, and the effectiveness of our responses in managing these impacts. While we believe we can adapt our business strategy to mitigate these effects, there is no assurance that these efforts will fully offset any increased costs.

Additionally, political tensions as a result of trade policies could reduce trade volume, investment and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets. Uncertainties in global economic conditions have in the past negatively impacted discretionary consumer spending. As our revenue in our Gaming and iGaming businesses is largely driven by players’ disposable incomes and level of gaming activity, a downturn in the economic environment may in turn have a material adverse impact on our business and financial condition.

The Company has determined to pursue a sole primary listing on the ASX, meaning we intend to delist our securities from Nasdaq, which could negatively affect the liquidity and trading prices of our common stock, and could result in a decline in stock prices and could limit investors’ ability to trade in our securities.

The Company remains focused on enhancing the liquidity and market capitalization of its ASX listing and has determined to pursue a sole primary listing on the ASX and delist our securities from Nasdaq. Such delisting, if consummated, could result in a decrease in disclosure or other information (including analyst coverage) about the Company, impact our access to the capital markets (including by limiting our ability to issue additional securities or obtain additional financing) and decrease the liquidity and trading prices of our common stock (even though stockholders may still continue to trade our common stock on an over-the-counter (“OTC”) market).