SKLZ

Litigation Outcome Update

• 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 provided advisory findings for alternative disgorgement amounts of $719 million (based on Papaya's profits) or $652 million (based on Papaya's cost savings), which will not be combined with actual damages; the court will decide the final disgorgement amount in June 2026
• Total potential judgment ranges from $420 million to over $1.2 billion after possible damage enhancements per Lanham Act rules; Skillz believes Papaya's scale supports its ability to pay any judgment, and is actively pursuing settlement discussions while evaluating options to secure capital against the award
• Litigation against Voodoo Games continues under the same fair play principles, following a favorable 2024 verdict against ABA Games that ultimately settled for $80 million

Core 2026 Strategic Initiatives

• Strengthen demand and engagement: Focus on quality and long-term value on the Skillz platform; retention for mature user cohorts improved quarter-over-quarter, driving higher per-user monetization. Top title Solitaire of Skills continues to scale, and the portfolio was expanded via acquisition of Blackout Bingo and Domino's Gold, with new titles planned for launch later in 2026. Razor added new advertisers across multiple verticals and launched its connected TV business to open a new revenue channel.
• Execute efficient, disciplined go-to-market: Skillz user acquisition (UA) spend is concentrated on channels with proven attractive returns, focused exclusively on acquiring profitable long-term players. Razor optimized media margins via improved product mix, and its machine learning platform continues to deliver better targeting efficiency and higher return on ad spend for clients; the new connected TV offering has already secured initial advertiser commitments.
• Improve platform performance and infrastructure: Skillz continues to advance pro SDK development for third-party developers. Razor upgraded its machine learning infrastructure by migrating to advanced neural network models, improving training efficiency and prediction accuracy, and expanding integrations with measurement partners. Q1 2026 saw completion of the Beamable acquisition, adding game developer tooling and backend infrastructure to complete Skillz's three-part connected ecosystem (Skillz competitive platform, Razor performance marketing, Beamable developer tools).

Financial Operational Highlights

• Ended Q1 2026 with $185 million in cash and cash equivalents, and $130 million in outstanding debt maturing at the end of 2026; management is evaluating strategic alternatives to optimize the firm's capital structure as maturity approaches

• Management expects the underlying trend of improving normalized profitability across the business portfolio to continue into Q2 2026
• After tightening UA spend to focus exclusively on profitable user acquisition in Q1, management has reached its targeted tightness for payback periods and is now positioned to thoughtfully expand marketing spend going forward
• PMAU and overall platform traffic are expected to stabilize at current levels and trend upward with improved unit economics going forward
• The court will issue its final determination on disgorgement and total judgment in the Papaya Gaming litigation in June 2026

Skillz Platform: GAAP revenue for the consolidated firm in Q1 2026 was $29 million, representing a 3% quarter-over-quarter decline and 33% year-over-year growth. Normalizing for a Q4 2025 indirect tax accrual release, Q1 2026 revenue is up 2% quarter-over-quarter. Adjusted EBITDA loss for the consolidated firm was $13 million, compared to a $10 million loss in Q4 2025 and a $17 million loss in Q1 2025. Excluding litigation-related expenses, adjusted EBITDA loss improved 15% quarter-over-quarter to $7 million. Paying MAU (PMAU) was 128,000, down 9% quarter-over-quarter and up 3% year-over-year; average revenue per paying user increased 7% quarter-over-quarter. Net loss for the firm improved 36% year-over-year to $11 million. Razor (performance marketing segment): Adjusted EBITDA was $2 million, marking the third consecutive quarter of profitability. Razor revenue grew across new and existing customers in Q1 2026, and the segment launched a new connected TV business to expand its addressable market. Beamable (acquired developer platform segment): Completed acquisition in Q1 2026, now integrated into the firm's ecosystem and continues to serve pre-acquisition developer clients, no separate profitability results provided in this quarter.

• Forward-looking statements around future performance, litigation outcomes, and the Papaya judgment are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations, as outlined in the firm's SEC filings
• The court may modify, reduce, or reject the advisory jury findings on disgorgement, which could result in a lower final judgment than the maximum potential amount
• Papaya may appeal the verdict, which could require Skillz to obtain an appeal bond or other secured capital to enforce the judgment
• The firm's $130 million in debt matures at the end of 2026, and there is uncertainty around the outcome of capital structure optimization efforts
• Two top third-party titles will exit the Skillz platform in January 2027, creating potential near-to-medium term revenue uncertainty
• The sequential decline in PMAU in Q1 2026 driven by reduced UA spend could impact near-term top line growth if expansion plans do not meet expectations

Q: GMV increased quarter-over-quarter despite a decline in paying MAU. What is driving higher spend per paying user, and what is the outlook for MAU after the recent pullback in non-paying users? / A: The outcome is intentional, as management has deliberately focused on attracting and retaining high-value long-term users. PMAU declined because the firm tightened user acquisition spend to prioritize only users with profitable short break-even periods and strong one-year payback. Management expects PMAU and overall traffic to stabilize and move upward with improved economics going forward, noting that serving higher-value customers creates a stronger overall business. (301 characters)

Q: Have user acquisition costs dropped following the favorable verdict against Papaya, and what has driven year-over-year PMAU growth over the past 12 months? / A: Management could not directly attribute any UA cost changes to the litigation verdict, but notes that Q1 2026 saw the most attractive UA costs the firm has seen in multiple years, and it is preparing to thoughtfully scale UA in high-return channels. PMAU growth is driven by long-term product-led investments in platform retention and engagement features focused specifically on attracting and retaining paying customers, which have now delivered consistent results. (382 characters)

Q: Two major third-party titles will exit the platform in January 2027. How should we model future revenue trajectory after this transition? / A: Skillz has already proactively adjusted its content portfolio: it acquired Blackout Bingo and Domino's Gold, and now owns and operates three of the top five titles on the platform. The firm already completed migration of 32 other titles from the departing developer in Q3 2025, and retains contractual rights to the two exiting titles through March 2027. Skillz already has multiple solitaire titles on platform, including its own owned and operated Solitaire of Skills, to offset the upcoming departure. (359 characters)

Q: The shift to owning and operating most major platform games is a change from the historic third-party developer model. Is this the permanent new strategy for Skillz, and what is the rationale? / A: Yes, owned and operated first-party content is a permanent strategic shift, building on Skillz's long history of holding stakes in platform content. Owning core content in stable popular categories like solitaire creates platform stability and a consistent user base, which benefits all third-party developers building new content and new genres on the platform. This aligns with common platform strategy in the broader gaming industry, used by firms like Epic Games and Valve. (327 characters)