PENN Entertainment, Inc.

Our Business

PENN Entertainment, Inc., together with its subsidiaries (“PENN,” the “Company,” “we,” “our,” or “us”), operates in 28 jurisdictions throughout North America, with a broadly diversified portfolio of casinos, racetracks, and online sports betting (“OSB”) and iCasino offerings. PENN’s focus is on organic cross-sell opportunities, reinforced by its market-leading retail casinos, sports media assets and technology, including a proprietary state-of-the-art, fully integrated digital sports betting and iCasino platform, and an in-house iCasino content studio. The Company’s portfolio is further bolstered by its industry-leading PENN Play TM customer loyalty program, offering its over 33 million members a unique set of rewards and experiences.

The majority of the real estate assets (i.e., land and buildings) used in our operations are subject to triple net master leases; the most significant of which are with Gaming and Leisure Properties, Inc. (Nasdaq: GLPI) (“GLPI”), a real estate investment trust (“REIT”), and include the AR PENN Master Lease, 2023 Master Lease, and Pinnacle Master Lease (as such terms are defined in Note 11, “Leases” in the notes to our Consolidated Financial Statements and collectively referred to as the “Master Leases”).

Realignment of Digital Strategy

On November 6, 2025, PENN announced the mutual decision for an early termination (the “Termination Agreement”) of its Sportsbook Agreement for United States (“U.S.”) OSB with ESPN, Inc. and ESPN Enterprises Inc. (together, “ESPN”). Pursuant to the Termination Agreement, PENN’s exclusive right to use the ESPN BET trademark for OSB in the U.S. ended on December 1, 2025. As a result, we have realigned our digital focus to leverage the strength of our U.S. iCasino and Canadian operations, while continuing to use OSB to drive both the acquisition of customers with significant lifetime value and unique cross-sell opportunities across PENN’s retail and digital assets. On December 1, 2025, we rebranded our OSB offering in the U.S. to theScore Bet. We have operated theScore Bet brand in Ontario since 2022, and our OSB product in both the U.S. and Canada now leverages connectivity with the theScore media app, which has approximately 4 million monthly active users across North America. PENN’s iCasino forward approach has clear long-term alignment to our core business, which focuses on cross-sell opportunities across our ecosystem and enhanced connectivity to our PENN Play loyalty program. Our OSB offerings will continue to provide top of funnel acquisition and cross-sell opportunities for our Hollywood-branded iCasino, which will remain integrated into our OSB product in states where legal, in addition to serving as a standalone iCasino app.

Recent Development Projects

On October 10, 2022, the Company announced its intent to pursue four new development projects, including the land-based relocations of Hollywood Casino Joliet (“Joliet”) and Hollywood Casino Aurora (“Aurora”), a second hotel tower at M Resort Spa Casino (“M Resort”), and a new hotel at Hollywood Casino Columbus (“Columbus”).

Subsequently, on February 21, 2023, as described in Note 11, “Leases” in the notes to the Consolidated Financial Statements, the Company and GLPI entered into a master development agreement (the “Master Development Agreement”) related to these development projects.

The Master Development Agreement provides that GLPI will fund (i) up to $225.0 million for the relocation of our riverboat casino and related developments with respect to Aurora (the “Aurora Project”); and (ii) upon our request, up to $130.0 million for the relocation of our riverboat casino and related developments with respect to Joliet (the “Joliet Project”), up to $150.0 million for the second hotel tower at M Resort (the “M Resort Project”), up to $70.0 million for the new hotel tower at Columbus (the “Columbus Project” and together with Joliet Project and M Resort Project, the “Other Development Projects,” and together with the Aurora Project, referred to as the “PENN Development Projects”), all within accordance with certain terms and conditions set forth in the Master Development Agreement. GLPI has committed up to $225.0 million in funding for the Aurora Project at a 7.75% cap rate, which we are required to draw and the funding will be structured as rent under the 2023 Master Lease (as described in Note 11, “Leases” in the notes to the Consolidated Financial Statements). Rent within the 2023 Master Lease will also increase by a percentage, based on the then-current GLPI stock price, of any project funding received by PENN from GLPI for the Other Development Projects. The PENN Development Projects still under construction are all subject to necessary regulatory and other government approvals.

The Joliet Project to relocate its riverboat casino operations to a new, state-of-the-art land-based facility opened on August 11, 2025. The best-in-class property features approximately 1,000 slots and 43 live table games, including high-limit slots and table games, a baccarat room, and a retail sportsbook. Its unique bars and restaurants include Sorellina by Giada De Laurentiis and Boulevard Food & Drink Hall. Additional features of the new property include an approximately 10,000 square foot, all-ages event center with meeting areas, and approximately 1,330 parking spaces. On August 1, 2025, the Company received the full $130.0 million in committed funding from GLPI for the Joliet Project, resulting in a $10.1 million increase in annual rent, subject to annual escalation pursuant to the 2023 Master Lease.

The Aurora Project to relocate its riverboat casino operations to a new, land-based facility is expected to open late in the second quarter of 2026. The land-based casino will feature roughly 1,200 gaming positions, approximately 220 guest rooms, a retail sportsbook, outdoor entertainment area, full-service spa, high-quality bars and restaurants, an approximately 12,000 square foot event center with meeting areas, and approximately 1,700 parking spaces. The Aurora Project included the transfer of certain parcels of land from the City of Aurora, and up to $50.0 million of the project will be funded by the city through a new bond issuance. As of February 25, 2026, we have neither requested nor received any funding from GLPI for the Aurora Project, while the Company has received $29.3 million from the City of Aurora.

The second hotel tower at M Resort opened on December 1, 2025. The M Resort Project added 375 rooms to the Company’s property south of the Las Vegas Strip, bringing its total to 765 rooms and suites. Along with the rooms, the project includes expanded meeting space, updated amenities, and additional local partnerships. On November 3, 2025, the Company received the full $150.0 million in committed funding from GLPI for the M Resort Project, resulting in an $11.7 million increase in annual rent, subject to annual escalation pursuant to the 2023 Master Lease.

The new hotel at Columbus is expected to open late in the second quarter of 2026. The hotel is expected to include 180 rooms, meeting space, an additional restaurant, and local partnerships and amenities. We did not request or receive any funding from GLPI for the Columbus Project, and GLPI’s funding commitment expired on December 31, 2025.

On April 24, 2025, the Company announced a development project to relocate its Ameristar Council Bluffs (“ACB”) riverboat casino operations to a new, land-based property to be rebranded as Hollywood Casino Council Bluffs (“HCCB”). Under the proposed plan, the new HCCB is expected to include roughly 125,000 square feet of new development with approximately 58,000 square feet of gaming space and more than 1,000 positions on a single level. The new facility will complement the existing retail sportsbook, 160-room hotel, and dining options in the landside portion of the current infrastructure. The project is anticipated to cost between $180.0 million and $200.0 million and is expected to open in late 2027 to early 2028. GLPI has committed to finance up to $150.0 million at a 7.1% cap rate, which may be structured at PENN’s option as either rent or a 5-year term loan that is prepayable at any time without penalty.

Strategic Overview

We believe that our portfolio of assets provides us with the benefit of geographically diversified cash flow from operations. We expect to continue to expand our gaming operations through the implementation and execution of a disciplined capital expenditure program at our existing properties, the pursuit of strategic acquisitions and investments, and the development of new gaming properties. Our sports media assets and proprietary online sports betting and iCasino technology reinforce our strategy to continue evolving from the nation’s largest regional gaming operator to a best-in-class omni-channel provider of retail gaming, iCasino, and sports betting entertainment. Additionally, our iCasino forward strategy with long-term alignment to our core business will focus on cross-sell opportunities across our ecosystem and enhanced connectivity to our PENN Play loyalty program.

Operating and Competitive Environment

Most of our properties operate in mature, competitive markets. We expect the majority of our future growth to come from our OSB and iCasino businesses; improvements, expansions, or relocations of our existing properties; entrance into new jurisdictions or verticals; expansions of gaming in existing jurisdictions; strategic investments and acquisitions; and cross-sell opportunities between our retail gaming, OSB, and iCasino businesses. Our portfolio is comprised largely of well-maintained regional gaming facilities, which has allowed us to develop what we believe to be a solid base for future growth opportunities.

We continuously adjust operations, offerings, and cost structures to reflect changing economic conditions, as well as consumer demand and behaviors. We also continue to focus on technology enhancements and providing customers with additional gaming and entertainment experiences through our differentiated omni-channel strategy. We seek to grow our customer database and PENN Play loyalty program through our iCasino and OSB businesses, the development of new properties, the expansion of existing properties and other business lines, and through partnerships with third-party partners, such as Shake Shack Inc., Ticketmaster Entertainment, LLC, Norwegian Cruise Line Holdings Ltd., Live Nation Entertainment, Inc., and Choice Hotels International, Inc. In addition, we believe that our online gaming offerings, combined with other strategic relationships we have, or may develop in the future, should enable us to acquire new customers, expand our player database, and provide additional revenue streams that enhance our omnichannel strategy.

The gaming, media, and entertainment industries are characterized by an increasingly high degree of competition among a large number of participants. We compete with a variety of gaming operations, including casinos and hotel casinos of varying quality and size and other gaming options such as state and province-sponsored internet lotteries, sweepstakes, charitable gaming, video gaming terminals at bars, restaurants, taverns and truck stops, historical horse racing gaming terminals, illegal slot machines and skill games, fantasy sports and third-party internet or mobile-based gaming platforms, including both legal and illegal iCasino and sports betting operations, and emerging prediction markets. See the“Segment comparison of the years ended December 31, 2025 and 2024” section below for discussions on our results of operations by reportable segment.

Key Performance Indicators

In our business, revenue is driven by discretionary consumer spending. We have no certain mechanism for determining why consumers choose to spend more or less money at our properties or on our online offerings from period-to-period; therefore, we are unable to quantify a dollar amount for each factor that impacts our customers’ spending behaviors. However, based on our experience, we can generally offer some insight into the factors that we believe are likely to account for such changes and which factors may have a greater impact than others. For example, decreases in discretionary consumer spending have historically been brought about by actual or perceived weakened general economic conditions, such as recessions, inflation, rising interest rate environments, tight credit conditions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, high fuel or other transportation costs, global hostilities, political or social unrest, and the effects of pandemics. In addition, visitation and the volume of play have historically been negatively impacted by significant construction surrounding our properties, adverse regional weather conditions, and natural disasters. In all instances, such insights are based solely on our judgment and professional experience, and no assurance can be given as to the accuracy of our judgments.

The majority of our revenues is gaming revenue, which is highly dependent upon the volume and spending levels of customers at our properties. Our gaming revenue is derived primarily from slot machines (which represented approximately 86%, 86%, and 85% of our gaming revenue in 2025, 2024, and 2023, respectively) and, to a lesser extent, table games, OSB, and iCasino. Aside from gaming revenue, our revenues are primarily derived from our hotel, dining, retail, commissions, program sales, admissions, concessions, and certain other ancillary activities, and our racing operations.

Key performance indicators related to gaming revenue are slot handle and table game drop, which are volume indicators, and “win” or “hold” percentage. Our typical property slot win percentage is in the range of approximately 5% to 11% of slot handle, and our typical table game hold percentage is in the range of approximately 12% to 30% of table game drop.

Slot handle is the gross amount wagered during a given period. The win or hold percentage is the net amount of gaming wins and losses, with liabilities recognized for accruals related to the anticipated payout of progressive jackpots. Given the stability in our slot hold percentages on a historical basis, we have not experienced significant impacts to net income from changes in these percentages. For table games, customers usually purchase chips at the tables. The cash and markers (extensions of credit granted to certain credit-worthy customers) are deposited in the gaming table’s drop box. Table game hold is the amount of drop that is retained and recorded as gaming revenue, with liabilities recognized for funds deposited by customers before gaming play occurs and for unredeemed gaming chips. As we are primarily focused on regional gaming markets, our table game hold percentages are fairly stable as the majority of these markets do not regularly experience high-value play, which can lead to volatility in hold percentages. Therefore, changes in table game hold percentages do not typically have a material impact to our results of operations and cash flows.

Key performance indicators related to online gaming revenue, including OSB and iCasino, are handle, which is a volume indicator, and “win” or “hold” percentage. Our OSB win percentage is in the range of approximately 4.6% to 9.8% of online handle and our iCasino win percentage is in the range of approximately 1.6% to 5.8% of online handle.

For online gaming, customers deposit cash into their online accounts for use in OSB and iCasino play. Liabilities are recognized for online player account funds that have not been withdrawn and for wagers that have been placed on events that have not yet occurred. Online sportsbook handle is the gross amount wagered during a given period. The win or hold percentage is the net amount of gaming wins and losses, with liabilities recognized for any bonus funds deposited into player accounts. Given that OSB wagers are made based on the outcomes of future sporting events, the win or hold percentage can vary based on the bet type (i.e., straight wagers vs. parlay wagers). Online slot handle is the gross amount wagered during a given period. The win or hold percentage is the net amount of gaming wins and losses, with liabilities recognized for accruals related to the anticipated payout of online progressive jackpots. Given the stability in our online slot hold percentages on a historical basis, we have not experienced significant impacts to the results of our operations or cash flows from changes in these percentages. Online table game hold is the amount of handle that is retained and recorded as gaming revenue. Our online table game hold percentages are fairly stable as we do not regularly experience high-value online play, which can lead to volatility in hold percentages. Given the stability in our online table game hold percentages on a historical basis, we have not experienced significant impacts to the results of our operations or cash flows from changes in these percentages.

Under normal operating conditions, our properties generate significant operating cash flow since most of our revenue is cash-based from slot machines and table games. Our business is capital intensive, and we rely on cash flow from our properties to generate sufficient cash to satisfy our obligations under the Triple Net Leases (as defined in“Liquidity and Capital Resources”), repay debt, fund maintenance capital expenditures, repurchase our common stock, fund new capital projects at existing properties and provide excess cash for future development and acquisitions. Additional information regarding our capital projects is discussed in“Liquidity and Capital Resources” below.

Reportable Segments

We have five reportable segments: Northeast, South, West, Midwest, and Interactive. The Northeast, South, West, and Midwest segments (referred to as our “retail segments”) primarily generate revenue from gaming operations (such as slot machines and table games), food and beverage offerings and hotel visitation. The Interactive segment includes all of our OSB, online casino/iCasino, and social gaming (collectively referred to as “online gaming”) operations, management of retail sports betting, media, and the operating results of Barstool Sports, Inc. (“Barstool” or “Barstool Sports”) subsequent to the Barstool Acquisition on February 17, 2023 and prior to the Barstool divestiture on August 8, 2023 (as defined and discussed in Note 5, “Acquisitions and Dispositions” in the notes to our Consolidated Financial Statements).

Our gaming and racing properties are grouped by geographic location, and each is viewed as an operating segment with the exception of our two properties in Jackpot, Nevada, which are viewed as one operating segment. We consider our combined Video Gaming Terminal (“VGT”) operations, by state, to be separate operating segments. For a listing of our gaming properties and VGT operations included in each reportable segment, see Note 2, “Significant Accounting Policies and Basis of Presentation” in the notes to our Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following table highlights our revenues, reportable segment revenues, net loss, Consolidated Adjusted EBITDA, and Segment Adjusted EBITDAR. Such segment reporting is consistent with how we measure our business and allocate resources internally. We consider net loss to be the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (“GAAP”) to Consolidated Adjusted EBITDA, which is a non-GAAP financial measure. Refer to“Reportable Segment Measures” below for the definition of Segment Adjusted EBITDAR. Refer to“Non-GAAP Financial Measure” below for the definition of Consolidated Adjusted EBITDA as well as a reconciliation of net loss to Consolidated Adjusted EBITDA.

(1)The Other category, included in the tables to reconcile the segment information to the consolidated information, consists of the Company’s stand-alone racing operations, namely Sanford-Orlando Kennel Club, Sam Houston and Valley Race Park, the Company’s joint venture interest in Freehold Raceway (which ceased operations on December 28, 2024), and our management contract for Retama Park Racetrack. Expenses incurred for corporate and shared services activities that are directly attributable to a property or are otherwise incurred to support a property are allocated to each property. The Other category also includes corporate overhead, which consists of certain expenses, such as: payroll, professional fees, travel expenses, and other general and administrative expenses that do not directly relate to or have not otherwise been allocated. Corporate overhead was $134.8 million, $104.8 million, and $106.7 million for the years ended December 31, 2025, 2024, and 2023, respectively. Corporate overhead for the year ended December 31, 2025 includes $22.4 million of legal and advisory costs related to activist activity in connection with the Company’s 2025 annual meeting of shareholders held on June 17, 2025 (the “2025 Annual Meeting”).

(3)See definition of “Segment Adjusted EBITDAR” within the “Reportable Segment Measures” section below.

(4)Pertains to the following operating leases: (i) AR PENN Master Lease; (ii) 2023 Master Lease; (iii) Margaritaville Lease (for the period January 1, 2023 to December 3, 2025); (iv) Greektown Lease (for the period January 1, 2023 to December 3, 2025); and (v) VICI Master Lease (beginning December 4, 2025).

(5)See definition of Consolidated Adjusted EBITDA within the“Non-GAAP Financial Measure” section below.

Consolidated comparison of the years ended December 31, 2025 and 2024

Revenues

The following table presents our consolidated revenues:

Gaming revenues for the year ended December 31, 2025 increased by $180.5 million comparedto the prior year, primarily due to an increase in online gaming revenues at our Interactive segment. This increase was due toiCasino and online sports betting growth driven by ongoing product enhancements and decreased promotional expense. Additionally, the recent openings of our new land-based Joliet facility and the second hotel tower at M Resort contributed to increases in revenues within our Midwest and West segments, respectively. Despite weather events negatively impacting our Northeast segment, its revenues increased by$8.6 million compared to the prior year. Increases in revenues within our Northeast, Midwest, and West segments were partially offset by decreases within our South segment, where newsupply continues to impact visitation.

Food, beverage, hotel, and other revenues for the year ended December 31, 2025 increased by $202.4 million compared to the prior year, primarily due to an increase in gaming tax reimbursement amounts related tothird-party online sports betting and/or iCasino partners foronline sports betting and iCasino market access of $152.7 million compared to the prior year. Our South segment’s food, beverage, hotel, and other revenues increased compared to the prior year, reflecting higher room availability and guest traffic following the completion of room renovations and remodeling at certain properties in 2025, as well as the reopening of select dining venues. Additionally, the recent openings of our new land-based Joliet facility and the second hotel tower at M Resort contributed to increases in revenues within our Midwest and West segments, respectively, as discussed above.

See“Segment comparison of the years ended December 31, 2025 and 2024” below for more detailed explanations of the fluctuations in revenues.

Operating expenses

The following table presents our consolidated operating expenses:

Gaming expenses consist primarily of gaming taxes, payroll, advertising, marketing and promotional, and other expenses associated with our gaming operations. Gaming expenses for the year ended December 31, 2025 increased by $17.4 million compared to the prior year. For the year ended December 31, 2025, gaming taxes increased at our retail properties within our Northeast, West, and Midwest segments, due to an increase in gaming revenues, andat our Interactive segment, due to an increase inonline gaming revenue as discussed above. The increase was partially offset by a decrease in marketing expense at our Interactive segment compared to the prior year. In the prior year period, we incurred additional marketing expenses to support our initial launch of ESPN BET within our Interactive segment.

Food, beverage, hotel, and other expenses consist primarily of payroll costs, costs of goods sold, and other costs associated with our food, beverage, hotel, retail, racing, and Interactive operations. Food, beverage, hotel, and other expenses for the year ended December 31, 2025 increased $176.7 million compared to the prior year, primarily due to increases in gaming tax reimbursement amounts related to third-party online sports betting and/or iCasino partners for online sports betting and iCasino market access.

General and administrative expenses include items such as compliance, facility maintenance, utilities, property and liability insurance, surveillance and security, and lobbying expenses, as well as all expenses for administrative departments such as accounting, purchasing, human resources, legal, and internal audit. General and administrative expenses also include stock-based compensation expense; pre-opening expenses; acquisition and transaction costs; gains and losses on disposal of assets; insurance recoveries, net of deductible charges; changes in the fair value of our contingent purchase price obligations; expense associated with cash-settled stock-based awards (including changes in fair value thereto); and rent expense associated with our triple net operating leases.

General and administrative expenses for the year ended December 31, 2025 increased by$65.4 million compared to the prior year, primarily due legal and advisory costs related to activist activity incurred in connection with the Company’s 2025 Annual Meeting of $22.4 million, an increase in pre-opening expenses of $17.3 million for the PENN Development Projects, and an increase in rent expense of $11.6 million stemming from the 2023 Master Lease lease modifications on August 1, 2025 and November 3, 2025, as well as annual escalators on our triple net operating leases.

Impairment losses for the year ended December 31, 2025 primarily relate to an impairment charge at our Interactive segment for goodwill of $825.0 million as a result of an interim impairment assessment during the third quarter of 2025, an impairment charge at our ACB property for its trademark of $15.0 million as a result of an interim impairment assessment during the second quarter of 2025, an impairment charge at our South segment for goodwill of $7.0 million as a result of our annual impairment assessment during the fourth quarter of 2025, and impairment charges at our Northeast, South, and West segments for other intangible assets of $98.3 million as a result of our annual impairment assessment during the fourth quarter of 2025.

The impairment of goodwill at our Interactive segment resulted from the Company’s realignment of its digital focus following the mutual decision for an early termination of our Sportsbook Agreement with ESPN (as defined in Note 12, “Commitments and Contingencies”). The impairment of the trademark at our ACB property resulted from the strategic decision to rebrand ACB. The impairment of goodwill in our South segment resulted from economic challenges in a specific operating region which led to reductions in long-term cash flow projections. Additionally, a former expansion of legislation in the market, increased supply, and economic challenges resulted in reductions in long-term projections for certain of our properties in our Northeast, South, and West segments, resulting in gaming license and trademark impairment charges at certain reporting units in those segments in 2025. See Note 8, “Goodwill and Other Intangible Assets” in the notes to the Consolidated Financial Statements for further discussion.

During the year ended December 31, 2024, we recorded impairment charges on our goodwill and other intangible assets of $12.3 million and $76.8 million, respectively, as a result of our annual impairment assessment during the fourth quarter of 2024.

The following table presents our consolidated other income (expenses):

Interest expense, net decreased by$64.7 million for the year ended December 31, 2025, as compared to the prior year. The prior yearand the first quarter of 2025 included interest expense related to the Company’s financing arrangement, which is described infurther detail below in “Gain on financing arrangement.” Additionally, capitalized interest related to the PENN Development Projects increased from the prior year period.

Interest income decreased by$13.9 million for theyear ended December 31, 2025, as compared to the prior year, primarily due to lower cash balances invested in our money market funds.

Income from unconsolidated affiliates relates principally to our investment in the Kansas Entertainment and Freehold Raceway joint venture. Operations at Freehold Raceway ceased on December 28, 2024. The change in income from the prior year is due to fluctuations in earnings from our investments in these unconsolidated affiliates.

Gain on REIT transactions, net relates to the derecognition of assets associated with the previously leased Joliet facility in connection with the 2023 Master Lease modification, effective August 1, 2025. See Note 11, “Leases” to our Consolidated Financial Statements for further discussion.

Gain on financing arrangement relates to a $215.1 million non-cash gain on a financing arrangement that we entered into in February 2021 with a third-party, which provided the Company with upfront and non-refundable cash proceeds while permitting us to participate in future proceeds on certain insurance coverage claims for economic losses PENN sustained due to the COVID-19 pandemic. During the first quarter of 2025, the Company determined that obligations under these claims are no longer probable and therefore recognized a non-cash gain related to this obligation comprised of cash proceeds received in 2021 of $72.5 million and $142.6 million of accreted non-cash interest. See Note 10, “Long-Term Debt” to the Consolidated Financial Statements for additional details.

Loss on early extinguishment of debt relates to the repurchases of the 2.75% convertible notes due 2026 (the “Convertible Notes”). See Note 10, “Long-term Debt” to our Consolidated Financial Statements for further discussion.

Other primarily relates to realized and unrealized gains and losses on equity securities held by PENN Interactive as well as miscellaneous income and expense items. The equity securities were sold in the second quarter of 2025.

Income tax expensefor the year ended December 31, 2025 was $24.6 million, as compared to a $28.0 million benefit for the year ended December 31, 2024. Our effective tax rate (income taxes as a percentage of loss from operations before income taxes) was(3.0)% for the year ended December 31, 2025, as compared to 8.2% for the year ended December 31, 2024.

The change in the effective tax rate for theyear ended December 31, 2025 compared to the prior year was primarily due to: (i) excluding certain foreign losses for which no tax benefit can be recognized in our worldwide effective tax rate calculation; (ii) non-deductible permanent items; (iii) state taxes; and (iv) changes to the valuation allowance. See Note 13, “Income Taxes” to the Consolidated Financial Statements for additional details.

Our effective income tax rate may vary each reporting period depending on, among other factors, the geographic and business mix of our earnings, changes to our valuation allowances, and the level of our tax credits. These and other factors, including our history and projections of pre-tax earnings, are considered in assessing the realizability of our net deferred tax assets.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBB”) was enacted. The impacts were limited to timing differences, including bonus depreciation, accelerated research and experimental expenses, and utilization of interest carryforwards, with no material effect on the Company’s effective tax rate. The enactment lowered current year cash taxes, and the resulting current year federal net operating loss and tax credit carryforwards are expected to be fully utilized in future periods.