Light & Wonder, Inc.: Form 10-Q for the period ended Jun 30, 2026

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,” *Part I, Item 1A “*Risk Factors” and *Part II, Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 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 2025 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 2025 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.

CONSOLIDATED RESULTS

($ in millions)

Revenue

32

Gaming revenue increased 5% for the three months ended June 30, 2026, as compared to the prior year period. Revenue growth was primarily driven by higher Gaming operations revenue of $14 million supported by our diversified portfolio of high-performing game franchises, along with a $24 million increase in revenue from Grover. Table products contributed $7 million in growth driven by an increase in global utility sales. These increases were partially offset by a decrease in Gaming machine sales of $7 million, as the prior year period benefited from the timing of North America VLT shipments, and a decrease in Gaming systems revenue of $12 million for the three months ended June 30, 2026, primarily due to lower hardware sales as compared to the prior year period.

Gaming revenue increased 4% for the six months ended June 30, 2026, as compared to the prior year period. Revenue growth was primarily driven by higher Gaming operations revenue of $37 million, supported by our diversified portfolio of high-performing game franchises, along with an increase of $67 million in revenue from Grover. Table products contributed $19 million in growth driven by an increase in global utility sales. This was partially offset by a decrease in Gaming machine sales of $58 million, as the prior year period benefited from the timing of international and North America VLT shipments, and a decrease in Gaming systems revenue of $21 million, primarily due to lower hardware sales as compared to the prior year period.

SciPlay revenue decreased by $18 million and $34 million, or 9% and 8%, for the three and six months ended June 30, 2026, respectively, as compared to the prior year periods. These decreases were primarily due to a softer social casino free-to-play market and 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 4% and 6% for the three and six months ended June 30, 2026, respectively. Revenue generated via the proprietary direct-to-consumer platform continues to increase and represented approximately 29% and 18% of total SciPlay revenue for the three months ended June 30, 2026 and 2025, respectively, and 28% and 16% for the six months ended June 30, 2026 and 2025, respectively.

iGaming revenue increased by $11 million and $25 million, or 14% and 16%, for the three and six months ended June 30, 2026, respectively. Revenue growth was 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 4% and 6% for the three and six months ended June 30, 2026, respectively, primarily as a result of lower cost of products and services in correlation with lower Gaming machine sales and SciPlay revenue.

SG&A

SG&A was relatively flat for the three months ended June 30, 2026, as compared to the prior year period. SG&A increased 5% for the six months ended June 30, 2026, as compared to the prior year period. This was primarily due to higher salaries and benefits (including stock-based compensation) of $14 million, higher bad debt expense of $6 million (as the prior year reflected recoveries of certain balances), and higher legal and professional services of $5 million, partially offset by a decrease in marketing expense of $11 million, primarily driven by SciPlay.

D&A

D&A increased 18% for both the three and six months ended June 30, 2026, primarily due to depreciation related to Gaming operations installed base investments and growth, D&A associated with the Grover acquisition and a $9 million impairment charge related to a SciPlay studio restructuring.

Restructuring and Other

Restructuring and other decreased for the three months ended June 30, 2026, primarily due to an $11 million impact from the revaluation of the Grover contingent acquisition consideration during the second quarter of 2026, as well as $11 million in lower strategic initiatives, acquisitions, and related expenses (primarily related to the Grover acquisition in the prior year period), partially offset by an increase in employee severance and related charges of $14 million.

Restructuring and other increased for the six months ended June 30, 2026, primarily due to $50 million in legal reserve contingencies associated with certain legal matters, while costs related to strategic review and related transactions decreased, including prior period legal and professional service fees associated with the acquisition of Grover of $14 million and $9 million in iGaming charges, primarily related to the discontinuation of our iGaming Live Casino operations. The six months ended June 30, 2026 also included higher employee severance and related costs of $7 million and the revaluation of the Grover contingent acquisition consideration of $11 million.

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 six months ended June 30, 2026 compared to the three and six months ended June 30, 2025)

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, electronic pull tabs 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.

For additional information, refer to the Gaming primary business activities summary included within “Business Segment Results” under *Part II, Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2025 10-K.

Current Year Update

Gaming revenue for the three and six months ended June 30, 2026 increased by 5% and 4%, respectively, as compared to the prior year periods, driven by growth in Gaming operations revenue, which benefited from an increase supported by our diversified portfolio of high-performing game franchises, along with an increase in revenue from Grover. The increase in Gaming revenue also benefited from Table products growth for the three and six months ended June 30, 2026. Gaming machine sales decreased, as the prior year periods primarily benefited from the timing of North America VLT shipments and timing of international shipments impacting the six-month current year period, while Gaming systems revenue decreased due to lower hardware sales as compared to the prior year periods.

Our growth is driven by the continued strength of our diversified portfolio of successful game franchises and the success of our COSMIC®, COSMIC UPRIGHT, LIGHTWAVE® and LIGHTWAVE SOLARTM cabinets. While demand remains strong, we are actively monitoring any impact of tariffs, inflationary pressures, supply chain disruptions, geopolitical uncertainty, and macroeconomic uncertainty that may impact our operations and financial results. See *Part I, Item 1A “*Risk Factors” within our 2025 10-K for further information regarding these factors which may have an impact on our Gaming business.

Results of Operations and KPIs

Three and Six Months Ended June 30, 2026 and 2025

($ in millions, except per unit amounts)

Gaming Operations

Gaming operations revenue growth for the three and six months ended June 30, 2026 was primarily driven by increases of $14 million, or 7%, and $37 million, or 10%, respectively, from strong game performance of hit franchises, including our premium games, as well as increases of $24 million and $67 million, respectively, in revenue from Grover. Gaming operations for U.S. and Canada had a 2,271-unit increase in installed base from June 30, 2025 to June 30, 2026 and an increase in average daily revenue per unit of $2.83 and $1.46 for the three and six months ended June 30, 2026, respectively, as average daily revenue per unit growth related to premium U.S. and Canada units was partially offset by the inclusion of lower-yielding Grover units. Average daily revenue per unit for international units decreased by $0.59 for the three months ended June 30, 2026 and increased by $0.15 for the six months ended June 30, 2026. International ending installed base units decreased by 1,118 units from June 30, 2025 to June 30, 2026, primarily due to the expected closure of certain LBOs in the U.K.

Gaming Machine Sales

Gaming machine sales revenue decreased by $7 million, or 4%, and $58 million, or 15%, for the three and six months ended June 30, 2026, respectively, as the prior year periods benefited from the timing of North America VLT shipments, with the six-month prior year period also benefiting from the timing of international shipments.

The following table summarizes Gaming machine sales changes:

Gaming Systems

Gaming systems revenue decreased 16% to $61 million for the three months ended June 30, 2026 and by 15% to $115 million for the six months ended June 30, 2026. The majority of the decreases were due to lower hardware sales as compared to the prior year periods.

Table Products

Table products revenue increased 13% to $62 million for the three months ended June 30, 2026 and by 18% to $125 million for the six months ended June 30, 2026. The majority of the increases were due to higher utility sales, as compared to the prior year periods.

Operating Expenses and AEBITDA

Operating expenses increased by $6 million and $25 million for the three and six months ended June 30, 2026, respectively, as compared to the prior year periods, primarily due to $8 million and $27 million in higher D&A, respectively, of which $7 million and $24 million is related to Grover, and the remainder of which is related to increased Gaming operations investment. Operating expenses also increased due to $2 million and $16 million in higher salaries and benefits (including stock-based compensation) for the three and six months ended June 30, 2026, respectively. These increases were partially offset by $5 million and $18 million in lower cost of revenue, respectively, primarily associated with a decrease in Gaming machine sales.

AEBITDA increased by $27 million and $44 million for the three and six months ended June 30, 2026, respectively, while AEBITDA as a percentage of revenue (“AEBITDA margin”) increased to 55% and 54% for the three and six months ended June 30, 2026, respectively, as compared to 53% and 52%, respectively, for the prior year periods, primarily due to margin enhancement initiatives and a more favorable revenue mix.

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. Revenue generated via SciPlay’s proprietary direct-to-consumer platform continues to increase and represented approximately 28% of total SciPlay revenue for the six months ended June 30, 2026. 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 revenue decreased for the three and six months ended June 30, 2026, primarily due to a softer social casino free-to-play market and a decline in average monthly payers, largely attributable to Jackpot Party® Casino, partially offset by an increase in average monthly revenue per paying user. The overall social casino industry is experiencing pressures from sweepstakes operators and remains challenged amid a mature social casino market. 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 and the Middle East, 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 Six Months Ended June 30, 2026 and 2025

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

(in millions unless otherwise noted)

SciPlay revenue decreased by 9% and 8% for the three and six months ended June 30, 2026, respectively, due to a softer social casino free-to-play market and a decline in average monthly payers, primarily attributable to Jackpot Party® Casino, partially offset by an increase in average monthly revenue per paying user. Direct-to-consumer revenue increased by 51% and 63% for the three and six months ended June 30, 2026, respectively, as compared to the prior year periods.

Average MAU and average MPU for the three and six months ended June 30, 2026 decreased due to the turnover in users. ARPDAU decreased slightly while AMRPPU increased, despite payer conversion decreasing slightly, as SciPlay continues to enhance content and features.

Payer conversion rates decreased slightly, as average MPU declined by a greater percentage than average MAU.

Operating Expenses and AEBITDA

Operating expenses decreased 1% and 7% for the three and six months ended June 30, 2026, respectively, as compared to the prior year periods, which was primarily driven by lower cost of revenue and higher margin on our direct-to-consumer platform revenue, as well as lower user acquisition costs of $6 million and $12 million for the three and six months ended June 30, 2026, respectively, partially offset by higher D&A costs of $9 million and $11 million, respectively.

AEBITDA for the three months ended June 30, 2026 decreased by $2 million to $72 million as compared to the prior year period, while it remained flat for the six months ended June 30, 2026, as compared to the prior year period. AEBITDA margin increased by 3 and 4 percentage points to 40% and 38%, respectively, primarily due to revenue generated via our proprietary direct-to-consumer platform, which yields 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.

In November 2025, the U.K. Government’s Autumn Budget increased gambling duties that increase tax liabilities for our customers and consequently impact our revenue and earnings, which became effective April 1, 2026. We continue to assess the impact on our iGaming segment, which includes U.K. revenue representing approximately 15% to 20% of total iGaming revenue subject to this tax. See *Part I, Item 1A “*Risk Factors” within our 2025 10-K for further information regarding U.K. Government gaming tax changes.

Results of Operations

Three and Six Months Ended June 30, 2026 and 2025

iGaming revenue for the three and six months ended June 30, 2026 increased 14% and 16%, respectively, as compared to the prior year periods. Revenue growth was primarily driven by continuing momentum in the North American market underpinned by 1PP growth and the expansion of our partner network, despite increased U.K. gambling duties, which became effective on April 1, 2026. Wagers processed through our Open Gaming System for the three-month period ended June 30, 2026 increased to $31.3 billion from $26.6 billion during the prior year period.

Operating expenses increased 9% and 4% for the three and six months ended June 30, 2026, respectively, as higher costs in correlation with higher revenues were partially offset by $2 million and $9 million, respectively, in restructuring costs in the prior year periods, largely related to the discontinuation of our Live Casino operations. AEBITDA increased 18% and 20% for the three and six months ended June 30, 2026, respectively, and AEBITDA margin increased to 36% for both the three and six months ended June 30, 2026, primarily due to operational efficiencies and higher 1PP revenue mix.

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 *Part II, Item 7 “*Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 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 *Part II, Item 7 “*Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 10-K.

LIQUIDITY, CAPITAL RESOURCES AND WORKING CAPITAL

Cash and Available Liquidity

As of June 30, 2026, 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 $143 million and $156 million as of June 30, 2026 and December 31, 2025, 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. 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 2025 10-K.

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. We may also repurchase shares of our outstanding common stock (including CDIs) through our Board-approved share repurchase program, up to an aggregate amount of $1.5 billion through June 12, 2027. During the six months ended June 30, 2026, we repurchased approximately 1.8 million CDIs at an aggregate cost of $156 million (excluding excise taxes). On February 19, 2026, we retired all existing treasury shares and restored such shares to the status of authorized but unissued shares in accordance with the Nevada Revised Statutes. All future shares (including CDIs) repurchased under our share repurchase program will also be retired and restored to the status of authorized but unissued shares.

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, either through the public or private issuance of equity or debt securities or through additional borrowings under our existing or additional financing arrangements, which sources of funds may not necessarily be available on terms acceptable to us, or at all. 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 2025 10-K.

On January 22, 2026, we amended the LNWI Credit Agreement and reduced the applicable margin on the LNWI Term Loan B. Following the amendment, the interest rate for the Term Loan B is either (i) the Adjusted Term SOFR Rate (as defined in the LNWI Credit Agreement) plus 2.00% per annum or (ii) a base rate plus 1.00% per annum.

Cash Flow Summary

(in millions)

41

Cash flows from operating activities

(in millions)

Net cash provided by operating activities increased primarily due to earnings growth coupled with favorable changes in working capital accounts. Changes in working capital accounts for the six months ended June 30, 2026, as compared to the prior year period, improved by $73 million primarily due to timing of receivables collections and payment of expenditures over the current year period, partially offset by $65 million in higher legal settlement payments during 2026.

Cash flows from investing activities

Net cash used in investing activities decreased primarily due to the Grover acquisition in the prior year period, partially offset by higher capital expenditures in the current year period, primarily driven by Gaming operations growth (inclusive of Grover).

Cash flows from financing activities

Net cash used in financing activities decreased primarily as a result of lower purchases of our outstanding common stock (including CDIs) under our share repurchase program, partially offset by increased debt repayments, net of borrowings. During the six months ended June 30, 2026 and 2025, we paid $163 million and $270 million, respectively, to purchase our common stock (including CDIs) (including $7 million and $4 million in excise taxes paid, respectively). The prior year included $800 million of borrowings incurred under the LNWI Term Loan A, which was used to fund the Grover acquisition.

Credit Agreement and Other Debt

For additional information regarding our credit agreements and other debt, interest rate risk and interest rate hedging instruments, see Notes 14 and 15 and *Part II, Item 7A “*Disclosures About Market Risk” in our 2025 10-K as well as Notes 10 and 11 and *Part I, Item 3 “*Quantitative and Qualitative Disclosures About Market Risk” below in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

As of June 30, 2026, 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 June 30, 2026, the face value of long-term debt was $5.2 billion, including $3.1 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 $31 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 13a-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 June 30, 2026.

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in our risk factors from those disclosed under *Part I, Item 1A “*Risk Factors” included in our 2025 10-K.