FIRY

Litigation Outcome (Papaya Gaming)

• A unanimous jury found Papaya Gaming liable for false advertising under the Lanham Act and deceptive practices under New York law, awarding Skillz $420 million in actual damages, the largest false advertising award in U.S. Lanham Act history.
• The jury issued advisory findings for alternative disgorgement amounts: $719 million from Papaya's profits or $652 million from Papaya's cost savings, which will not be added to actual damages. The court will finalize the total award, which can range from $420 million to over $1.2 billion after possible enhancements. A final ruling on disgorgement is expected in June 2026, and active settlement discussions are ongoing.
• The verdict confirmed Papaya operated large-scale undisclosed bot competition, advertised ~$6.7 billion in prize pools that only actually paid out ~$2 billion to real users. Litigation against Voodoo Games continues on the same fair play principles.

Core 2026 Strategic Initiatives

• Strengthen demand and engagement: Focus on quality, long-tenured players on the Skillz platform; retention for 3+ month cohorts improved QoQ, driving higher per-user monetization. Solitaire Skillz continues to scale, and the owned content portfolio was expanded via the acquisitions of Blackout Bingo and Dominoes Gold, with new titles launching later in 2026. RZR added new advertisers across gaming, consumer apps, retail, and entertainment, and launched a connected TV business to open a new revenue channel.
• Execute efficient, disciplined go-to-market: Skillz user acquisition (UA) spend remains focused on profitable long-term players, concentrating investment in high-return channels. RZR optimized media margins via improved product mix, and its machine learning platform continues to improve targeting efficiency and return on ad spend for advertisers.
• Improve platform performance and infrastructure: Skillz continues advancing Pro SDK development for new and converted third-party games. RZR migrated to advanced neural network models, improving training efficiency and prediction accuracy, and expanded integrations with measurement partners. The Beamable acquisition was completed in Q1 2026, adding a third component to Skillz's connected ecosystem that brings developer tooling to internal products and RZR clients.

Financial Operational Highlights

• Total GAAP revenue: $29 million, down 3% QoQ and up 33% YoY; normalizing for a Q4 2025 indirect tax accrual release, Q1 2026 revenue is up 2% QoQ.
• Adjusted EBITDA loss: $13 million, vs a $10 million loss in Q4 2025, driven by higher litigation expenses. Excluding litigation costs, adjusted EBITDA loss improved 15% QoQ to $7 million.
• Net loss: $11 million, a 36% improvement YoY. Ended Q1 2026 with $185 million in cash and cash equivalents and $130 million in debt maturing at the end of 2026.

• Management expects underlying profitability improvement across its business portfolio to continue into the second quarter of 2026.
• Management expects PMAU and overall platform traffic to stabilize at current levels and trend flat to up going forward, alongside continued improvements in unit economics.
• No formal numerical revenue or profitability guidance was provided for full year 2026. The company is evaluating strategic alternatives to optimize its capital structure ahead of its $130 million debt maturity at the end of 2026.

1. Skillz Platform: GAAP revenue contribution to total Q1 2026 revenue was not explicitly broken out as an absolute standalone figure. Total company GAAP revenue for Q1 2026 is $29 million. Key platform metrics: paying MAU (PMAU) of 128,000, down 9% quarter-over-quarter (QoQ) and up 3% year-over-year (YoY); average revenue per paying user increased 7% QoQ. Adjusted EBITDA for the segment, excluding litigation expenses, contributed to a normalized total company adjusted EBITDA loss of $7 million.
2. RZR: Adjusted EBITDA was $2 million, marking the third consecutive quarter of profitability. RZR grew revenue from both new and existing advertisers in Q1 2026, and launched a new connected TV advertising channel.
3. Beamable: The acquisition of Beamable, a developer platform for game services and back-end infrastructure, was completed in Q1 2026. It continues to serve pre-acquisition independent developer and studio clients while integrating into Skillz's ecosystem, with no separate Q1 2026 financial performance provided.

• The final damage award from the Papaya Gaming litigation is subject to court decision, which could result in a lower total award than the potential maximum of over $1.2 billion. Papaya may appeal the verdict, which could require Skillz to secure an appeal bond or other secured capital to protect the judgment.
• Two top third-party titles (Solitaire Cube and 21 Blitz) are scheduled to exit the Skillz platform in January 2027, creating potential near-to-medium term revenue volatility.
• Forward-looking results, including the expected path to sustained profitability, are subject to general market and competitive risks that could cause actual outcomes to differ materially from management expectations, as outlined in the company's SEC filings.

Q: GMV grew quarter-over-quarter despite paying MAU declining — what is driving higher spend per player, and what is the outlook for user counts after the recent sequential decline? / A: The decline in paying MAU stems from intentional cuts to unprofitable user acquisition spend, as the company shifted focus to retaining and attracting only high-value, long-term profitable users with shorter breakeven periods and strong 1-year paybacks. Going forward, paying MAU and overall traffic are expected to stabilize and trend flat to up, while continuing to deliver improved unit economics; the company prioritizes a higher-value customer base over raw user growth. (218 characters)

Q: Have user acquisition costs fallen following the favorable Papaya verdict, and what has driven year-over-year paying MAU growth over the past year? / A: Management cannot directly link the verdict to lower UA costs, but notes that current UA costs are the most attractive they have been in multiple years, and the company is evaluating thoughtful scaling of UA spend in high-return channels. The year-over-year paying MAU growth is a result of sustained product-led investments in platform retention and engagement features focused on attracting and keeping paying customers. (307 characters)

Q: How will revenue be impacted when the top third-party titles Solitaire Cube and 21 Blitz exit the platform in 2027, and what is the strategy to offset this loss? / A: Skillz has already successfully migrated 32 titles from the same developer that exited early in 2025, with minimal negative impact reflected in current results. As of Q1 2026, Skillz owns and operates 3 of the top 5 titles on the platform including the in-house developed Solitaire Skillz, plus the acquired Blackout Bingo and Dominoes Gold, and has multiple additional Solitaire titles on the platform to offset the coming exit. (321 characters)

Q: Is the shift to owning and operating major first-party content a permanent strategic change for the business, and what is the rationale for this shift? / A: This is a permanent strategic shift from the historic model of relying primarily on third-party developer content; the company has held minority stakes in platform content for over 5 years, and is now expanding into first-party owned and operated content. Owning core popular, stable categories like Solitaire creates long-term platform stability and a consistent user base that benefits all third-party developers building new content on the platform, matching a common successful model for gaming platforms. (342 characters)