A. Reserved
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
The following risks should be considered in conjunction with “Item 5. Operating and Financial Review and Prospects”, the Consolidated Financial Statements, including the notes thereto, included in this annual report, and the other risks described in the Forward-Looking Statements safe harbor under the Private Securities Litigation Reform Act of 1995. These risks may affect the Company's operating results and, individually or in the aggregate, could cause its actual results to differ materially from past and anticipated future results. The following discussion of risks may contain forward-looking statements which are intended to be covered by the Safe Harbor Statement. Except as may be required by law, the Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. The Company invites you to consult any further related disclosures made by the Parent from time to time in materials filed with or furnished to the SEC.
Risks related to the Company's Business and Industry
The Company has a concentrated customer base, and the loss of any of its larger customers (or lower sales from any of these customers) could lead to significantly lower revenue.
A substantial portion of the Company’s revenues is derived from exclusive licenses awarded to the Company by ADM, the governmental authority responsible for regulating and supervising gaming in Italy. For the years ended December 31, 2025 and 2024, approximately 18%, at both periods, of the Company’s total consolidated revenues was earned from services provided for the operation of the Italian Lotto games and approximately 19% and 17%, respectively, was earned from services provided for the operation of the Italian Scratch & Win (Gratta e Vinci) instant ticket games.
The Company expects that a significant portion of its revenues and profits will continue to depend upon the licenses awarded to the Company by ADM. These licenses are not renewable and may be terminated prior to their expiration dates upon the occurrence of certain events of default affecting the Company, or if such licenses are deemed to be against the public interest, or terminated or annulled if successfully challenged by competitors. In addition, the conditions for any new license will be established by law and included in the rules of the new license. Any material reduction in the Company’s revenues from these licenses, including as a result of an annulment, early termination, or non-renewal of these licenses following their expiration, has had, and may in the future have, a material adverse effect on the Company’s results of operations, business, financial condition, or prospects.
In addition, recurring revenues from the Company’s top 10 customers outside of Italy accounted for approximately 35% of its total consolidated revenues for the year ended December 31, 2025. In August 2025, Allwyn UK, one of our historic top ten customers outside of Italy, completed its U.K. lottery system transition to another supplier, thereby resulting in the loss of a customer which accounted for approximately $37 million and $54 million in revenues in 2025 and 2024, respectively.
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Furthermore, lower‑than‑expected sales by one or more of the Company’s larger customers could materially adversely affect the Company. For example, LMAs include performance‑based incentive mechanisms that may result in the Company earning additional payments if specified contractual metrics are achieved, or incurring shortfall payments if such metrics are not met. In 2025, the change in the incentive payment was reduced by $51 million, mainly due to lower MSJP activity.
If the Company were to lose any of its other larger customers, or if these larger customers experience lower sales and consequently reduced revenues, which are primarily service revenues, there could be a material adverse effect on the Company’s results of operations, business, financial condition, or prospects.
The Company’s operations are dependent upon its continued ability to retain and extend its existing contracts and win new contracts with its customers.
The Company derives a substantial portion of its revenues from its portfolio of long-term lottery operating contracts, FMCs, and LMAs (equal to approximately 92% of its total consolidated revenues for the year ended December 31, 2025), awarded through competitive procurement processes. The Company’s U.S. lottery contracts typically permit a lottery authority to terminate the contract at any time for material, uncured breaches and for other specified reasons out of the Company's control, such as the failure by a state legislature to approve the required budget appropriations. In addition, many of these contracts in the U.S. permit the lottery authority to terminate the contract at will with limited notice and do not specify the compensation to which the Company would be entitled were such termination to occur. If one or more of the Company’s U.S. lottery contracts were terminated, or were not renewed or extended, there is no guarantee that the Company would be able to identify replacement sources of revenue in a timely fashion, or at all. Additionally, the loss of one or more of the Company’s U.S. lottery contracts to a competitor could place the Company at a competitive disadvantage.
In the event that the Company is unable or unwilling to perform under certain lottery contracts, such contracts permit the lottery authority a right to use the Company's system-related equipment and software necessary for the performance of the contract until the expiration or earlier termination of the contract.
The termination of or failure to renew or extend one or more of the Company’s lottery contracts, or the renewal or extension of one or more of the Company’s lottery contracts on materially altered terms, could have a material adverse effect on the Company’s results of operations, business, financial condition, or prospects.
The lottery industry is a competitive industry, and the Company’s success largely depends on its ability to win long-term lottery contracts.
The Company’s business depends heavily on the ability to win, maintain, and renew long‑term lottery contracts, and substantial revenue could be lost if the Company is unable to renew such contracts on substantially similar terms or at all. As certain jurisdictions seek to privatize or outsource lottery service operations, the Company faces increasing competition from both traditional and new market participants, including, in some cases, competitors with greater financial resources. In pursuing these opportunities, the Company may find it necessary or desirable to enter into strategic relationships with third parties, including competitors, and may be required to commit significant financial resources.
Competition for long‑term lottery contracts has caused, and may in the future cause, the Company to enter into agreements on less favorable terms and at significant cost. If the Company is unable to secure contracts on favorable terms, this has resulted, and may in the future result, in the award of contracts on terms that increase costs or impose other commercial risks, any of which could have a material adverse effect on the Company’s business and results of operations.
Competition from other forms of comparable entertainment and shifts toward digital channels could adversely affect the Company’s business.
The Company’s lottery products compete with numerous other forms of comparable entertainment that seek to attract consumers’ discretionary spending, including sports betting, iGaming, land based gaming, casino sweepstakes, social gaming, and prediction markets. Expansion of these activities or increased consumer participation in such alternatives may reduce demand for lottery products. Any shift in consumer spending away from lottery products could adversely affect the Company’s business, financial condition, and results of operations.
In certain jurisdictions, the Company holds a retail lottery license but does not hold the corresponding digital or iLottery license. In these jurisdictions, consumers may migrate from retail lottery products to digital gaming channels. If demand shifts to digital formats, the Company may be unable to participate in or benefit from that shift at all or in a timely manner, which could lead to reduced retail lottery sales and adverse effects on the Company’s revenues, profitability, and competitive position.
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Even if the Company is able to shift the affected retail lottery products to digital formats, the pace and extent of changes in consumer behavior and channel preference are difficult to predict, and such changes could materially impact the Company’s operations and financial condition.
Adverse changes in discretionary consumer spending and behavior, including as a result of the occurrence or perception of economic slowdown, rising interest rates and/or inflation, may adversely affect the demand for lottery and overall economic trends specific to the lottery industry and the Company's business.
Sociopolitical and economic factors that impact consumer confidence may result in decreased discretionary spending by consumers and have a negative effect on the Company's business. Unfavorable changes in social, political and economic conditions and economic uncertainties, as well as decreased discretionary spending by consumers, may adversely impact customers, suppliers and business partners in a variety of ways.
Consumer discretionary income and its potential effects on lottery activity may directly or indirectly impact the revenues generated by the Company's business. Economic factors resulting in a reduction, or the perception of a reduction, in such discretionary income could negatively impact draw game, instant ticket, and iLottery play.
The occurrence or perception of an economic slowdown or recession may also have a negative impact on consumer discretionary spending, particularly when combined with the occurrence or perception of rising interest rates and inflation (or increases in the prices of consumer products, including food and energy). If these conditions persist or worsen, it may result in declines in draw game, instant ticket, and iLottery participation, which could have a material adverse effect on the Company’s business and results of operations.
The Company is subject to substantial penalties for failure to perform.
The Company’s Italian licenses, lottery contracts in the U.S. and in other jurisdictions, and other service contracts often require performance bonds or letters of credit to secure its performance under such contracts and require the Company to pay substantial monetary liquidated damages in the event of non-performance by the Company.
At December 31, 2025, the Company had outstanding performance bonds and letters of credit in an aggregate amount of approximately $696 million. These instruments present a potential expense for the Company and could divert financial resources from other uses. Claims on performance bonds, drawings on letters of credit, and payment of liquidated damages could individually or in the aggregate have a material adverse effect on the Company's results of operations, business, financial condition, liquidity, or prospects.
The Company’s success depends in large part on its ability to develop and manage frequent introductions of innovative products and the ability to respond to technological changes, and slow growth or declines in the lottery market could lead to lower revenues for the Company.
The Company’s future success will depend, in part, on the lottery industry’s success in attracting and retaining new players in the face of increased competition in the entertainment and lottery markets, as well as the Company's own success in developing innovative services, products, and distribution methods/systems to achieve this goal. The Company must continually introduce and successfully market new lottery games and technologies to remain competitive and effectively stimulate customer demand. The process of developing new lottery products is inherently complex and uncertain. It requires accurate anticipation of changing customer needs and end-user preferences as well as emerging technological trends. If the Company's competitors develop new content or innovative products and the Company fails to keep pace, its business could be adversely affected. Additionally, if the Company’s competitors adopt and employ new technologies, such as artificial intelligence, more rapidly than the Company is able to do so, the Company could experience a competitive disadvantage or comparatively higher costs than its competitors.
In addition, if the Company fails to accurately anticipate customer needs and end-user preferences through the development of new products, services and technologies, the Company could lose business to its competitors, which would adversely affect its results of operations, business, financial condition, or prospects. While the Company intends to continue investing resources in research and development, which includes new lottery hardware, software, content, services and systems, these investments may not guarantee successful products. Because the Company’s newer products are generally more technologically sophisticated than those it has produced in the past, the Company must continually refine its design, development, and delivery capabilities to ensure product innovation. Newer products also require adequate supply of electronic components and other raw materials, for which the Company relies on third party suppliers. See “The Company depends on its suppliers and faces supply chain risks that could adversely affect its financial results” within “Operational Risks” below.
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If the Company cannot efficiently adapt its processes and infrastructure to meet the needs of its product innovations, or if the Company is unable to source adequate supplies to manufacture its newer products, its results of operations, business, financial condition, or prospects could be negatively impacted.
The Company’s use of artificial intelligence, machine learning, data science, and similar technologies could result in reputational harm, competitive harm, legal liability, and adverse effects on results of operations.
The Company uses artificial intelligence (including generative artificial intelligence), machine learning, data science, and similar technologies (collectively, “AI”) in its technology and infrastructure, and these technologies may become increasingly important to the Company’s operations over time. Competitors or other third parties may incorporate AI in a similar or different manner, and may do so more quickly or more successfully than the Company, which could impair the Company’s ability to compete effectively and could adversely affect results of operations. Additionally, if the content, analyses, materials, software, or recommendations that AI produces or assists in producing are, or are alleged to be, infringing or otherwise violative of others’ rights (including intellectual property rights), or illegal, the Company may be subject to legal liability, or its business, reputation, financial condition, and results of operations may otherwise be adversely affected.
The content, analyses, materials, software, recommendations, and other outputs produced by AI (particularly generative AI) may be subject to limited or no intellectual property or other proprietary protection. The Company may lose intellectual property or proprietary rights in any data, content, confidential information, trade secrets, or other materials provided as inputs to AI technologies. If the Company is unable to assert proprietary rights in such outputs or inputs against use by third parties, the Company may experience competitive harm, and its financial condition and results of operations may be adversely affected.
The use of AI, particularly generative AI, may lead to unintended consequences, including outputs that appear correct but are factually inaccurate, misleading, or otherwise flawed, which could harm the Company’s reputation and business. In addition, the use of AI may result in violations of applicable data security or data privacy laws, or in cybersecurity incidents involving the personal data of end customers, employees, or other third parties. Any such violation or cybersecurity incident related to the Company’s use of AI could result in legal liability or could otherwise adversely affect the Company’s reputation and results of operations.
If the Company’s use of AI becomes controversial, the Company may experience brand or reputational harm or competitive harm. AI is subject to a dynamic and rapidly evolving legal and regulatory environment, the scope and application of which may be uncertain and may vary or conflict across jurisdictions. Compliance with existing and potential government regulation of AI may require significant resources, including resources designed to develop, test, and maintain platforms, offerings, services, and features that incorporate AI in accordance with applicable law, and to mitigate potential adverse effects on the Company’s results of operations.
If the Company is unable to protect its intellectual property or prevent its unauthorized use by third parties, its ability to compete in the lottery market may be harmed.
At December 31, 2025, the Company held more than 475 patent applications and granted patents and more than 2,350 trademarks filed and registered worldwide. However, intellectual property laws in the U.S., Italy, and in other jurisdictions may afford differing and limited protection, may not permit the Company to gain or maintain a competitive advantage, and may not prevent its competitors from duplicating its products, designing around its patented products, or gaining access to its proprietary information and technology.
The Company may not be able to prevent the unauthorized disclosure or use of its technical knowledge or trade secrets. For example, there can be no assurance that consultants, vendors, partners, former employees, or current employees will not breach their obligations regarding non-disclosure and restrictions on use. In addition, anyone could seek to challenge, invalidate, circumvent, or render unenforceable any of the Company's patents. Any pending or future patent applications the Company holds may not result in an issued patent, or, if patents are issued, such patents may not necessarily provide meaningful protection against competitors and competitive technologies or adequately protect the Company’s then-current technologies. The Company may not be able to detect the unauthorized use of its intellectual property, prevent breaches of its cybersecurity efforts, or take appropriate steps to enforce its intellectual property rights effectively. In addition, certain contractual provisions, including restrictions on use, copying, transfer, and disclosure of software, may be unenforceable under the laws of certain jurisdictions.
The Company’s success depends in part on its ability to obtain trademark protection for the names or symbols under which it markets its products and to obtain copyright protection and patent protection of its technologies and game innovations. The
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Company may not be able to build and maintain goodwill in its trademarks or obtain trademark or patent protection, and any trademark, copyright, or issued patent may not provide competitive advantages for the Company or that the Company’s intellectual property could be successfully challenged or circumvented by competitors.
The Company maintains various patents, trademarks, copyrights and trade secrets and intends to enforce its intellectual property rights. From time to time, the Company may assert claims against third parties that it believes are infringing its intellectual property rights. Litigation initiated or defended to protect and enforce the Company’s intellectual property rights could be costly, time consuming and distracting to management, could fail to obtain the results sought, and could have a material adverse effect on the Company’s results of operations, business, financial condition, or prospects.
If the Company is unable to license intellectual property from third parties, its ability to compete in the lottery market may be harmed.
The Company licenses intellectual property rights from third parties, including the various trademarks and copyrights for Ghostbusters®, Wheel of Fortune®, and other popular franchises. If such third parties do not properly maintain or enforce the intellectual property rights underlying such licenses, or if such licenses are terminated or expire without being renewed, the Company could lose the right to use the licensed intellectual property, which could adversely affect its competitive position or its ability to commercialize certain of its technologies, products, or services.
Third party intellectual property infringement claims against the Company could limit its ability to compete effectively.
Third parties could assert that the Company’s products infringe the intellectual property rights of such third parties. Infringement and other intellectual property claims and proceedings brought against the Company, whether successful or not, are costly, time consuming and distracting to management, and could harm the Company's reputation. In addition, intellectual property claims and proceedings could require the Company to do one or more of the following: (i) cease selling or using any of its products that allegedly incorporate the infringed intellectual property, (ii) pay substantial damages, (iii) obtain a license from the third-party owner, which license may not be available on reasonable terms, if at all, (iv) rebrand or rename its products, and (v) redesign its products to avoid infringing the intellectual property rights of third parties, which may not be possible and, if possible, could be costly, time consuming, or result in a less effective product. A successful claim against the Company could have a material adverse effect on its results of operations, business, financial condition, or prospects.
The Company’s inability to successfully complete, integrate or leverage strategic alliances could limit its future growth or otherwise be disruptive to its ongoing business.
From time to time, the Company expects it will enter into certain commercial alliances or relationships, or pursue corporate transactions such as mergers, acquisitions, divestitures, and spin offs, in support of its strategic goals. There can be no assurance that such strategic opportunities will be available on acceptable terms or at all or that the Company will be able to obtain necessary financing or regulatory approvals to complete such transactions. The Company’s ability to succeed in implementing its strategy will depend to some degree upon the ability of its management to identify, complete, arrange financing for, and successfully integrate commercially viable alliances or acquisitions. Such transactions may disrupt the Company’s ongoing business and distract management from other responsibilities. Further, the Company may incur unexpected costs, or fail to realize expected benefits from such transactions. In connection with any such transactions, the Company could face significant challenges in managing and integrating its expanded or combined operations, including acquired assets, operations, and personnel.
The Company’s results of operations, cash flows and financial condition could be affected by public health issues, geopolitical and regulatory instability and other potentially disruptive events in the locations where the Company’s customers, suppliers or regulators operate.
The Company may be impacted by public health crises (including the outbreak of communicable diseases such as COVID-19) that could negatively impact the Company’s operations or the operations of the Company’s customers, suppliers, data service providers and regulators.
The Company’s operations could also be impacted by geopolitical instability, including the uncertainty, outbreak and escalation of war (such as the Russia-Ukraine conflict and the conflict in Gaza), political unrest, terrorism, diplomatic instability, or other acts of violence any of which could adversely affect the Company’s ability to operate and deliver its products and services.
The Company’s operations and business could be impacted by regulatory and political uncertainty, including as a result of new or increased tariffs, trade wars, and other restrictions on trade between or among countries in which it operates, tensions
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between or among the jurisdictions in which it operates, changing or conflicting regulations and market expectations that may differ between jurisdictions in which it operates, and increased costs of compliance as a result of the foregoing. Any of these events could have a material adverse effect on the Company or its customers, which could have a material adverse effect on the Company’s results of operations, cash flows, financial condition, and reputation.
The Company’s insurance may not adequately, or at all, compensate the Company for any losses incurred as a result of natural or other disasters. Any serious disruption to the Company’s operations, or those of the Company’s customers, suppliers, data service providers, or regulators, could have a material adverse effect on the Company’s results of operations, cash flows and financial condition.
Divestitures may materially adversely affect the Company’s financial condition, results of operations or cash flows.
From time to time, the Company has, and may in the future, pursue divestitures in support of its strategic goals. For example, in July 2025, the Parent consummated the Transaction and completed the sale of its IGT Gaming business to a holding company owned by funds managed by affiliates of Apollo Global Management, Inc.
Divestitures involve risks, including difficulties in the separation of operations, services, products and personnel, the diversion of management's attention from other business concerns, the disruption of business, the potential loss of revenues, increased customer concentration, departures of key employees, the retention of uncertain contingent liabilities related to the divested business, and potential reputational harm resulting from proposed transactions or the failure to consummate a proposed transaction. The Company may not be successful in managing these or any other significant risks that it encounters in any divestiture the Company may undertake, and any such divestiture could materially and adversely affect the Company’s business, financial condition, results of operations and cash flows, and may also result in a diversion of management attention, operational difficulties and losses. Further, there can be no assurance whether any particular planned divestiture will be completed on the originally proposed terms and timeline, or at all, or that the strategic benefits and expected financial impact of any divestiture will be achieved.
The Company faces reputational risks related to the use of social media.
The Company frequently uses social media platforms as marketing tools. These platforms provide the Company, as well as individuals, with access to a broad audience of consumers and other interested persons. Negative commentary regarding the Company or the products it sells may be posted on social media platforms and similar devices at any time and may be adverse to the Company’s reputation or business. Further, as laws, regulations, and different platforms’ terms of service rapidly evolve to govern the use of social media, the failure by the Company, its employees or third parties acting at the Company's direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact the Company’s business, financial condition, and results of operations or subject it to fines or other penalties.
Legal and Compliance Risks
The Company faces risks related to the extensive and complex governmental regulation applicable to its operations.
The Company’s activities are subject to extensive and complex governmental regulation, including restrictions on advertising, increases in or differing interpretations by authorities on taxation, limitations on the use of cash, and anti-money laundering compliance procedures. These regulatory requirements are constantly evolving and may vary from jurisdiction to jurisdiction. In addition, the perception or threat of changing regulations may result in industry adoption of new or different practices. Any potential or actual changes in the legal or regulatory framework or other changes, such as increased taxation, changes in the compensation paid to licensees, or increases in the number of licenses, authorizations, or licenses awarded to the Company's competitors, could materially affect its profitability.
In addition, in the U.S. and in many international jurisdictions where the Company currently operates or seeks to do business, lotteries are not permitted unless expressly authorized by law. The successful implementation of the Company’s growth strategy and its business could be materially adversely affected if jurisdictions that do not currently authorize lotteries do not approve such activities or if those jurisdictions that currently authorize lotteries do not continue to permit such activities.
Changes to trade regulation, quotas, duties or tariffs may materially adversely affect customer demand for the Company’s services and products.
The U.S. has recently enacted and proposed significant new tariffs on goods imported from numerous countries, including countries in which the Company conducts business. U.S. federal agencies have been directed to evaluate key aspects of U.S.
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trade policy further, and there has been ongoing discussion regarding potential significant changes to U.S. trade policies, treaties, and tariffs. As a result, significant uncertainty continues to exist regarding the future relationship between the U.S. and other countries with respect to such trade policies, treaties, and tariffs.
Furthermore, due to policy changes and government proposals, there may be greater restrictions and economic disincentives on international trade generally. New tariffs and other changes in U.S. trade policy could trigger retaliatory actions by affected countries, and foreign governments have instituted or are considering instituting trade sanctions on U.S. goods. Such changes have the potential to adversely impact the U.S. economy or sectors thereof, including the industries and countries in which the Company operates, and, as a result, could negatively affect the Company’s business, financial condition, and results of operations.
Investigations by governmental and licensing entities can result in adverse findings or negative publicity.
From time to time, the Company is subject to extensive background investigations, and other investigations of various types are conducted by governmental and licensing authorities with respect to applicable lottery regulations. These regulations and investigations vary from time to time and from jurisdiction to jurisdiction where the Company operates. The Company’s operations may be impacted if the Company is unable to obtain a privileged lottery license or has a privileged lottery license revoked by a regulatory authority. Because the Company’s reputation for integrity is an important factor in its business dealings with lottery and other governmental agencies, a governmental allegation or a finding of improper conduct by or attributable to the Company in any manner, the prolonged investigation of these matters by governmental or regulatory authorities, and/or the adverse publicity resulting therefrom could have a material adverse effect on the Company’s results of operations, business, financial condition, or prospects, including its ability to retain existing contracts or to obtain new or renewed contracts, both in the subject jurisdiction and elsewhere.
Failure to comply with data privacy laws, including the GDPR could result in significant penalties.
The Company’s business is subject to the E.U. GDPR and the U.K. GDPR. The GDPR imposes a number of obligations on controllers, including, among others, requirements in relation to: accountability, data minimization, storage limitation, transparency, privacy by design and default, automated individual decision-making, information security and personal data breach reporting.
The GDPR also prohibits the international transfer of personal data to countries outside the EEA/U.K. not deemed as having “adequate” data privacy laws unless a data transfer mechanism is implemented or GDPR derogation can be relied upon. Certain transfers also require that a transfer impact assessment be carried out.
Other jurisdictions in which the Company operates have implemented, or are considering implementing, data privacy laws similar to the GDPR. Several of the Parent’s subsidiaries deal with a significant amount of employee personal data. There is a risk that the Company's policies and procedures for compliance with data privacy laws, including the GDPR will not be implemented correctly or that individuals within the Company will not be fully compliant with the new procedures. Failure to comply with data privacy laws may have serious financial consequences to the Company, as well as significant administrative sanctions and reputational damage that could have a material adverse effect on the Company’s results of operations, business, financial condition, or prospects. There is a risk that we could be impacted by a cybersecurity incident that results in loss or unauthorized disclosure of personal data, potentially resulting in the Company facing harms similar to those described above.
Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with any new data protection rules. In addition, states are constantly adopting new laws or amending existing laws, requiring attention to frequently changing requirements. For example, California enacted the California Consumer Privacy Act (the “CCPA”), which took effect on January 1, 2020, and was further amended on January 1, 2023. The CCPA, as amended, is a comprehensive state privacy law that imposes, among other things, data protection obligations on companies doing business in California, including consumer rights processes, limitations on data storage and uses, new audit requirements for higher risk data, and opt outs for certain uses of personal or sensitive data. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches. Similar laws have been adopted and proposed in other states, and if passed, such laws may have potentially conflicting requirements that would make compliance challenging. Multiple other states and the federal government are considering enacting similar legislation, demonstrating a strong trend towards more stringent state privacy, data protection, and data security legislation in the U.S., which could increase our potential liability and adversely affect our business.
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The Federal Trade Commission (the “FTC”) and many state attorneys general are interpreting existing federal and state consumer protection laws to impose evolving standards for the collection, use, dissemination and security of personally identifiable information. The FTC has authority under Section 5 of the FTC Act to regulate unfair or deceptive practices and has used this authority to initiate enforcement actions against companies that implement inadequate controls around privacy and information security in violation of their externally facing policies. For instance, the FTC published an advance notice of proposed rulemaking on commercial surveillance and data security in 2022 and may implement new trade regulation rules or other regulatory alternatives concerning the ways in which companies (1) collect, aggregate, protect, use, analyze, and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive in the coming years. Privacy laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information. Violating individuals’ privacy rights, publishing false or misleading information about security practices, or failing to take appropriate steps to keep individuals’ personal information secure may constitute unfair or deceptive acts or practices in violation of Section 5 of the FTC Act. Federal regulators, state attorneys general and plaintiffs’ attorneys have been and will likely continue to be active in this space, and if we do not comply with existing or new laws and regulations related to personally identifiable information, we could be subject to criminal or civil sanctions.
The Company is exposed to significant risks in relation to compliance with anti-corruption laws and regulations and economic sanction programs.
Doing business worldwide requires the Company to comply with the laws and regulations of various jurisdictions. In particular, the Company's operations are subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act of 2010, and other anti-corruption laws that apply in countries where the Company operates. Other laws and regulations applicable to the Company control trade by imposing economic sanctions on countries and persons and creating customs requirements and currency exchange regulations. The Company's continued global expansion, including in countries which lack a developed legal system or have high levels of corruption, increases the risk of actual or alleged violations of such laws.
The Company cannot predict the nature, scope, or effect of future regulatory requirements to which its operations might be subject or the manner in which such laws might be administered or interpreted.
The policies and procedures the Company has implemented may not have been, and in the future may not be, followed at all times or may not effectively detect and prevent violations of these laws by one or more of the Company's directors, officers, employees, consultants, agents, joint-venture partners or other third-party partners. As a result, the Company could be subject to investigations, criminal and civil penalties, sanctions and/or other remedial measures that in turn could have a material adverse effect on its business, results of operations and financial condition.
Negative perceptions and publicity surrounding the lottery industry could lead to increased regulation.
The popularity and acceptance of lottery games is influenced by prevailing social attitudes toward the lottery, and changes in social attitudes toward the lottery could result in reduced acceptance of lottery play as a leisure activity. Further, from time to time, the lottery industry is exposed to negative publicity related to player behavior, play by minors, the presence of point-of-sale machines in too many locations, risks related to iLottery accessibility, and alleged association with money laundering. Publicity regarding problem gambling and other concerns with the lottery industry, even if not directly connected to the Company, could adversely impact its business, results of operations, and financial condition. For example, if the perception develops that the lottery industry is failing to address responsible lottery concerns adequately, the resulting political pressure may result in the industry becoming subject to increased regulation and restrictions on operations. Such an increase in regulation could adversely impact the Company's results of operations, business, financial condition, or prospects.
Changes to U.S. and foreign tax laws could adversely affect the Company.
The Company is subject to tax laws in the U.S. and several foreign tax jurisdictions and judgment is required in determining the Company’s global provision for income taxes. It is possible that the Company’s tax positions are not consistent with the tax laws in the jurisdictions in which it conducts business, and these positions may be overturned by tax authorities, which could have a significant impact on the Company’s global provision for income taxes.
Furthermore, changes in tax laws or regulations may be proposed or enacted that could significantly affect the Company’s overall tax expense.
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The Organisation for Economic Co-operation and Development’s (“OECD”) project on base erosion and profit shifting (“BEPS”) has given rise to significant changes in domestic and international tax laws in recent years. For example, BEPS has resulted in jurisdictions implementing laws which (among other things): (i) limit deductibility of interest payments; (ii) expand the scope of permanent establishment (thereby extending the scope of jurisdictions' taxing rights); (iii) counteract hybrid mismatch arrangements; and (iv) strengthen 'Controlled Foreign Company' rules.
In addition, the OECD is continuing to work on a two-pillar initiative, “BEPS 2.0,” which is aimed at (i) shifting taxing rights to the jurisdiction of the consumer (“Pillar One”); and (ii) ensuring all companies pay a global minimum tax (“Pillar Two”).
Under the Pillar One proposals, multinational enterprises (“MNEs”) with global turnover in excess of 20 billion euros (excluding extractives and regulated financial services) would become subject to rules reallocating 25% of profits in excess of a 10% profit margin to the jurisdictions where the customers and users of those MNEs are located. The Pillar One proposals are continuing to be negotiated, with the detail of the final Pillar One rules and implementation thereof remaining uncertain.
Pillar Two is aimed at ensuring that MNEs with annual global revenues of at least 750 million euros are subject to a minimum effective tax rate of 15% in the jurisdictions in which they operate. Pillar Two proposes that participating jurisdictions introduce three interlocking domestic rules: (i) a qualifying domestic minimum top-up tax (“QDMT”), which imposes a “top-up” tax on an entity in the implementing jurisdiction which has an effective tax rate below 15%; (ii) an Income Inclusion Rule (“IIR”), which imposes top-up tax on a parent entity in the implementing jurisdiction in respect of the low-taxed income of a constituent entity; and (iii) an Undertaxed Payment Rule (“UTPR”), which denies deductions of or requires an equivalent adjustment by an entity in the implementing jurisdiction to the extent the low-taxed income of a constituent entity is not subject to tax under an IIR. Pillar Two also includes a treaty-based Subject To Tax Rule (“STTR”) that allows source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum rate. Various participating jurisdictions (including the U.K.) have already implemented or are in the process of implementing the Pillar Two rules by adopting QDMT, IIR and/or UTPR rules in their domestic legislation, with these rules beginning to come into effect in certain jurisdictions starting from 2024. A limited number of participating jurisdictions have either signed or expressed an intention to sign a multilateral convention to implement the STTR, although the timeline for implementation of the STTR remains uncertain.
Depending on whether and how the Pillar Two rules are implemented in jurisdictions relevant to the Company’s business and the business of the companies in which the Company invests, effective tax rates payable by the Company and the companies in which the Company invests could increase. The implementation may also increase the complexity and costs of compliance, and could necessitate or increase the probability of some restructuring of the Company’s group or business operations.
The Company may be subject to an unfavorable outcome with respect to pending regulatory, tax, or other legal proceedings, which could result in substantial monetary damages or other harm to the Company.
The Company is involved in a number of legal, regulatory, tax, and arbitration proceedings including claims by and against it as well as injunctions by third parties arising out of the ordinary course of its business or its other business activities and is subject to investigations and compliance inquiries related to its ongoing operations. It is difficult to estimate accurately the outcome of any proceeding. As such, the amounts of the Company’s provision for litigation risks could vary significantly from the amounts the Company may be asked to pay or ultimately pay in any such proceeding. In addition, unfavorable resolution of or significant delay in adjudicating such proceedings could require the Company to pay substantial monetary damages or penalties and/or incur costs that may exceed any provision for litigation risks or, under certain circumstances, cause the termination or revocation of the relevant lottery license or authorization and thereby have a material adverse effect on the Company’s results of operations, business, financial condition, or prospects.
The Company is subject to physical risks relating to climate change and transitional risks relating to governmental and societal responses to climate change.
The Company, as well as its customers, suppliers, and partners, are subject to physical and transitional risks relating to climate change. Physical risks to our operations, and those of our affiliates, include increasingly severe and frequent weather-related events and natural disasters, such as hurricanes, floods, drought, wildfires, storms, and stresses on the water supply. The occurrence of one or more of these events could disrupt our properties, supply chain, and operations, and the Company’s suppliers, partners, and customers could pass along any increased costs to us, experience an interruption in their dealings with us, or experience decreased demand for our products and services. These risks could increase the Company’s operating costs (including the cost of our electricity and energy use) and compliance costs, impacting our ability to produce and market our products and the ultimate demand for our products and services.
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Transitional risks arise from regulatory changes and societal shifts by governmental authorities, non-governmental organizations, customers, investors, employees, and other stakeholders, who are increasingly sensitive to ESG matters, including climate change. The effects could include, for example, a global transition away from fossil fuels that may result in increased energy prices; shifting customer preferences; stakeholder pressure to decarbonize assets; or new legal or regulatory requirements that result in new or expanded carbon pricing, taxes, restrictions on greenhouse gas emissions, and increased greenhouse gas disclosure and transparency. Regulatory changes or shifts in consumer preferences could restrict our ability to manufacture certain products or require us to find alternatives for the manufacture of certain products. In addition, governments and the public increasingly expect companies like us to report on our business practices with respect to sustainability and environmental impact, among other ESG-related topics. For example, the E.U. has adopted the Corporate Sustainability Reporting Directive (CSRD) that requires sustainability disclosures, including climate-related information, in accordance with specified reporting standards. Similarly, the State of California recently passed the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act which may impose broad climate-related disclosure obligations on companies doing business in California. The Climate-Related Financial Risk Act was stayed pending litigation in 2025, and the court is also examining whether any relief should extend to the Climate Corporate Data Accountability Act. The SEC adopted a final rule in 2024 requiring certain climate disclosures. This rule was stayed pending litigation, and in 2025, the SEC voted to end its defense of the rule, with the result that it did not go into effect. More recently, the U.S. government has signaled a change in course on climate regulations, including through the issuance of executive orders and the determination to withdraw from the Paris Agreement on climate change.
This focus on ESG matters, and the need to comply with complex and potentially conflicting requirements and expectations in different jurisdictions, may lead to increased costs of compliance as well as new expectations or requirements that could result in increased costs associated with research, development, manufacture, or distribution of our products, and with our and our customers’ operations more generally. Our ability to compete could also be affected by changing customer preferences and requirements, such as growing demand for companies to establish validated sustainability targets or offer more sustainable products. Failure to meet evolving regulatory requirements and stakeholder expectations could also result in litigation or regulatory actions, affecting demand for our products, which may have a material adverse impact on our financial results and longer-term loss of trust, undermining the credibility of the Company.
Operational Risks
The Company depends on its suppliers and faces supply chain risks that could adversely affect its financial results.
The Company purchases most of the parts, components, and subassemblies necessary for its lottery terminals from outside sources primarily located throughout Asia, including China, Taiwan, and Vietnam. The Company then outsources the manufacturing and assembly of certain lottery terminals to third-party vendors. The Company’s operating results could be adversely affected if one or more of its manufacturing and assembly outsourcing vendors fails to meet defined quality standards and production schedules. Disruptions and delays could adversely affect our suppliers’ ability to meet production schedules.
While the Company continues to seek opportunities to diversify its supply chain, the Company has experienced in the past, and may continue to experience, disruptions throughout its supply chain. In particular, the Company could be adversely impacted by a shortage in the supply of electronic components necessary for the manufacture of lottery terminals. These shortages would require the Company to adjust some of its delivery and production schedules, and could cause the Company to be unable to meet demand for its products or to introduce new products on schedule, leading to a reduction in potential sales. The duration, extent, and likelihood of shortages in electronic components, or other parts, components or subassemblies necessary for the manufacture of any of the Company’s finished products, is extremely difficult to predict. Furthermore, global supply chain constraints have also generally led to an increase in costs, including supply costs (such as the cost of paper and electronic components), freight costs, energy costs and labor costs, among others. The Company may not be able to pass these increased costs on to customers, which may lead to decreased profit margins. As a result, the Company's results of operations, business, financial condition, or prospects could be adversely affected by these supply chain disruptions, or any future supply chain disruptions.
In the Company’s business, the Company transmits data using cellular technology and satellite transponders, generally pursuant to long-term contracts. The technical failure of any of these cellular or satellite services would require the Company to obtain other communication services, including other cellular or satellite access. Any of the Company’s backup systems, which are designed to limit the Company’s exposure in the event of such a failure, may be inadequate. Therefore, the Company may not have access to such other cellular services or satellites or, if applicable, may not have the ability to use such other cellular services or satellites on favorable terms or in a timely manner. While cellular and satellite failures are infrequent, the operation of each is generally outside of the Company’s control.
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The Company’s management believes that if a supply contract with one of its vendors were to be terminated or breached, it may take time to replace such vendor under some circumstances and any replacement parts, components, or subassemblies may be more expensive, which could reduce the Company’s operating margins. Depending on a number of factors, including the Company’s available inventory of replacement parts, components or subassemblies, the time it takes to replace a vendor may result in a delay for a customer. Further, supply chain constraints and shortages could cause the Company’s existing vendors to be unable to meet supply commitments, which may cause delays in the Company’s ability to meet its contractually committed delivery schedules. Generally, if the Company fails to meet its delivery schedules under its contracts, it may be subject to substantial penalties or liquidated damages, or contract termination, which in turn could adversely affect the Company's results of operations, business, financial condition, or prospects.
The Company and its operations are subject to cyberattacks and cybersecurity risks which may have an adverse effect on its business and results of operations and result in increasing costs to minimize these risks.
The Company's business involves the storage and transmission of confidential business and personal information, including trade secrets, customer information, and other sensitive information, and theft, security breaches, or unauthorized access of a Company system may expose the Company to a risk of loss of, or improper use and disclosure of, such information, which may result in significant litigation expenses, liability exposure, reputational harm, and loss of consumer confidence in the integrity and security of the Company’s products and systems. Cyberattacks on businesses, including those targeting the lottery industry, are becoming more frequent and increasingly more difficult to anticipate and prevent due to their rapidly evolving nature, and the Company believes that risks and exposures related to cybersecurity will remain high for the foreseeable future. The Company has identified, reported, and managed cybersecurity incidents in the past, including the incident disclosed by the Company in November 2024, and it is possible that the Company could experience a material cybersecurity incident in the future.
Within the Company’s information security management system (the “ISMS”), the Company maintains policies, procedures, and controls designed to prevent, detect, and mitigate the potential negative effects of malware attacks, phishing attacks, password attacks, “Man-in-the-Middle” attacks, Denial-of-Service attacks, and other cybersecurity risks. However, the Company has experienced cyberattacks in the past and may not be able to prevent or detect every cyberattack or incident or reduce the negative effects they may cause.
Cyberattacks could also compromise trade secrets and other sensitive information and result in such information being disclosed to others and becoming less valuable, which could have a material adverse effect upon the Company’s results of operations, business, financial condition, or prospects. The Company’s security measures could be breached due to employee error, malfeasance, system errors, or vulnerabilities, including the vulnerabilities of the Company’s subcontractors, vendors, suppliers, or otherwise. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, become more sophisticated, and often are not recognized until launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventative measures.
The Company’s first and third-party cybersecurity insurance policies may not be sufficient to mitigate all the potential negative effects of a cyberattack or incident that occurs.
Failure to attract, retain and motivate personnel may adversely affect the Company's ability to compete.
The Company's ability to attract and retain key management, product development, finance, marketing, and research and development personnel, and its ability to attract and maintain a workforce with a wide range of backgrounds, attributes, viewpoints and experiences, is directly linked to the Company's continued success. In all of the industries in which the Company operates, the market for qualified executives and highly-skilled technical workers is intensely competitive, and increasing competition for talent and changing expectations of current and prospective employees pose new challenges relating to the attraction and retention of key personnel. The loss of key employees or an inability to hire a sufficient number of technical staff could limit the Company's ability to develop successful products and could cause delays in getting new products to the market, which could in turn adversely affect the Company's results of operations and prospects.
The Company’s business prospects and future success rely heavily upon the integrity of its employees, directors, and agents.
The Company strives to set exacting standards of personal integrity for its employees, directors and agents and its reputation in this regard is an important factor in its business dealings with lottery and other governmental agencies. For this reason, an allegation or a finding of improper conduct on the Company’s part, or on the part of one or more of its current or former employees, directors or agents, or the failure to detect fraudulent activity in a timely manner, or potential investigations and
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other governmental reviews and inspections (including any resulting adverse impact on the perceived integrity and security of the Company’s products and systems), could have a material adverse effect upon the Company’s results of operations, business, financial condition, or prospects, including its ability to retain or renew existing contracts or obtain new contracts.
The success of the Company’s business is dependent on customers’ confidence in the integrity of the Company’s products and systems.
The real and perceived integrity and security of the Company’s products and systems are critical to its ability to attract customers and players. In the event of an actual or alleged defect in a Company product, the Company’s existing and prospective customers may lose confidence in the integrity and security of the Company’s products and systems. Such a failure could have a material adverse effect upon the Company’s results of operations, business, financial condition or prospects, including its ability to attract new customers and retain its existing customers.
Technology failures may disrupt the Company’s business and have an adverse effect on its results of operations.
The Company’s success depends on its ability to avoid, detect, replicate, and correct software and hardware defects and fraudulent manipulation of its products and internal information technology systems and applications. The Company incorporates security features into the design of its products and monitors its internal and external software and hardware, but such security features or technical efforts may not be effective.
In addition, any disruption in the Company’s network or telecommunications services, or those of third parties that the Company uses in its operations, could affect the Company’s ability to operate its systems, which could result in reduced revenues and customer downtime. The Company’s network and databases of business and customer information, including intellectual property and other proprietary business information and those of third parties the Company uses, are susceptible to outages due to fire, floods, power loss, break-ins, cyberattacks, network penetration, data privacy or security breaches, denial of service attacks, and similar events, including inadvertent dissemination of information due to increased use of social media. Disruptions with such systems could result in a wide range of negative outcomes, including devaluation of the Company’s intellectual property, increased expenditures on data security, and costly litigation and potential payment of liquidated damages, each of which could have a material adverse effect on the Company’s results of operations, business, financial condition, or prospects.
Financial Risks
Covenants in the Company’s debt agreements may limit its ability to pay dividends, repurchase shares and operate its business, and the Company’s breach of such covenants could materially and adversely affect its results of operations, business, financial condition, or prospects.
Certain of the Company’s debt agreements require that it comply with covenants that may limit the Company’s ability to:
•return capital to shareholders either through the payment of dividends and/or share repurchases;
•raise additional capital, including the issuance of debt;
•react to industry changes or economic conditions;
•acquire assets of other companies or acquire, merge or consolidate with other companies;
•dispose of assets;
•manage interest rate risk on its variable rate debt; and
•grant security interests in its assets.
The Company’s ability to comply with these covenants may be affected by events beyond its control, such as prevailing economic, financial, regulatory and industry conditions, and these covenants may limit its ability to react to market conditions or take advantage of potential business opportunities. Further, a breach of such covenants could, if not cured or waived, result in acceleration of its indebtedness, result in the enforcement of security interests or force the Company into bankruptcy or liquidation. Such a breach or any failure to otherwise timely repay outstanding indebtedness could have a material adverse effect on the Company’s results of operations, business, financial condition or prospects.
The Company may incur impairment charges.
The Company reviews its long-lived and amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. The Company tests goodwill and other indefinite-lived intangible assets for impairment at least annually. Factors that may indicate a change in circumstances, such that the carrying value of the
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Company’s goodwill, amortizable intangible assets, or other non-amortizing assets may not be recoverable, include a decline in the Company’s stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in industry segments in which the Company participates. If one or more of these factors occur, the Company may be required to record a significant charge in its Consolidated Financial Statements during the period in which any impairment of goodwill or intangible assets is determined, which would negatively affect the Company’s results of operations, and may negatively affect the price of the Company’s stock.
Fluctuations in foreign currency exchange rates affect our reported operating results in U.S. dollar terms.
Revenue generated and expenses incurred by our subsidiaries are often denominated in the currencies of the local countries. As a result, our consolidated U.S. dollar financial statements are subject to fluctuations due to changes in exchange rates when the financial results of our international subsidiaries are translated from local currencies into U.S. dollars. In addition, our financial results are subject to changes in exchange rates that impact the settlement of transactions in non-functional currencies. Our primary foreign currency exchange rate exposure arises from translating Euros into U.S. dollars.
Global events, including geopolitical developments, fluctuating commodity prices, trade tariff developments, and inflation, have caused and/or contributed to, and may in the future cause or contribute to, economic uncertainty and uncertainty about the interest rate environment. These factors could amplify the volatility of currency fluctuations, as has been the case in jurisdictions including Argentina in recent years. Therefore, fluctuations in the value of foreign currencies may impact our operating results when translated into U.S. dollars. Such fluctuations may also impact our ability to accurately predict our future results. Additionally, the Company’s hedging program may not be effective in offsetting the adverse financial impacts that may result from unfavorable movements in foreign currency exchange rates.
The establishment and utilization of alternative reference rates may increase the amount of interest the Company pays with respect to floating rate indebtedness denominated in U.S. dollars.
From time to time, the Company in the past has incurred and may in the future incur indebtedness subject to an interest rate calculated with reference to the Secured Overnight Financing Rate (“SOFR”), the principal replacement reference rate for the U.S. dollar London Inter-Bank Offered Rate (“USD LIBOR”). SOFR has a limited history, having been first published in April 2018. There is no assurance that SOFR will perform in the same or similar way as USD LIBOR would have performed, that SOFR will be a suitable replacement for USD LIBOR, or that the replacement of USD LIBOR with SOFR will not increase the amount of interest that the Company pays with respect to floating rate indebtedness denominated in U.S. dollars.
Risks related to the Loyalty Voting Structure
The concentrated voting power held by De Agostini, and the Parent’s loyalty voting structure, may limit other shareholders' ability to influence corporate decisions.
At February 19, 2026, De Agostini has an economic interest in the Parent of approximately 46.29% (excluding treasury shares) and, due to its election to exercise the Special Voting Shares associated with its ordinary shares pursuant to the Loyalty Plan, a voting interest in the Parent of approximately 63.28% of the total voting rights (excluding treasury shares). See “Item 7. Major Shareholders and Related Party Transactions” for additional information. Accordingly, this shareholder may make decisions with which other shareholders may disagree, including, among other things, delaying, discouraging, or preventing a change of control of the Company or a potential merger, consolidation, tender offer, takeover, or other business combination and may also prevent or discourage shareholders’ initiatives aimed at changes in the Company’s management.
The tax consequences of the loyalty voting structure under the Loyalty Plan are uncertain.
No statutory, judicial, or administrative authority has provided public guidance in respect of the Special Voting Shares of the Parent and as a result, the tax consequences of owning such shares are uncertain. The fair market value of the Parent's Special Voting Shares, which may be relevant to the tax consequences of owning, acquiring, or disposing of such shares, is a factual determination and is not governed by any guidance that directly addresses such a situation. Because, among other things, (i) the Special Voting Shares are not transferable (other than in very limited circumstances as provided for in the loyalty voting structure), (ii) in a winding up or otherwise, the holders of the Special Voting Shares will only be entitled to receive out of the Parent's assets available for distribution to its shareholders, in aggregate, $1, and (iii) loss of the entitlement to instruct the nominee on how to vote in respect of Special Voting Shares will occur without consideration, the Parent believes and takes the position that the value of each special voting share is minimal. However, the relevant tax authorities could assert that the value of the Special Voting Shares as determined by the Parent is incorrect. Shareholders are urged to consult their own tax advisors
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with respect to treatment of Special Voting Shares. See “Item 10. Additional Information – E. Taxation” for additional information.
The loyalty voting structure under the Loyalty Plan may affect the liquidity of the Parent's ordinary shares and reduce their ordinary share price.
The loyalty voting structure under the Loyalty Plan may limit the liquidity and adversely affect the trading prices of the Parent's ordinary shares. The loyalty voting structure is intended to reward shareholders for maintaining long-term share ownership by granting persons holding ordinary shares continuously for at least three years the option to elect to receive Special Voting Shares. The Special Voting Shares cannot be traded and, immediately prior to the deregistration of ordinary shares from the register of loyalty shares, any corresponding Special Voting Shares shall cease to confer any voting rights in connection with such Special Voting Shares. This loyalty voting structure is designed to encourage a stable shareholder base, but it may deter trading by those shareholders who are interested in gaining or retaining the Special Voting Shares. Therefore, the loyalty voting structure may reduce liquidity in the Parent's ordinary shares and adversely affect their trading price.