Skillz (SKLZ) Q1 2026 Earnings Transcript

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DATE

Tuesday, May 19, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Andrew C. Paradise
• Chief Financial Officer — Gaetano Franceschi

TAKEAWAYS

• Revenue -- $29 million, reflecting a 3% sequential decline and a 33% increase year over year.
• Adjusted EBITDA Loss -- $13 million, rising from $10 million in the previous quarter, attributed to higher litigation expenses.
• Normalized Adjusted EBITDA Loss (ex-litigation) -- $7 million, a 15% sequential improvement.
• Paying Monthly Active Users (PMAU) -- 128,000, down 9% sequentially and up 3% year over year.
• Average Revenue Per Paying User -- Up 7% sequentially, reflecting stronger monetization from mature cohorts.
• GAAP Net Loss -- $11 million, a 36% year-over-year improvement.
• Research & Development Expense -- $5 million, up 5% year over year, supporting ongoing investments in Skillz and RZR.
• Sales & Marketing Expense -- $17 million, down 4% year over year; user marketing was $8 million, user acquisition was $3 million.
• General & Administrative Expense -- $19 million, increasing 2% year over year.
• Cash and Debt Position -- $185 million in cash and cash equivalents, with $130 million in debt maturing by year-end.
• RZR Performance -- RZR reported $2 million in adjusted EBITDA, its third consecutive profitable quarter.
• Papaya Gaming Litigation Verdict -- Skillz awarded $420 million in actual damages for false advertising, with potential for total remedies up to $1.2 billion depending on court determination.
• Jury Advisory Findings on Disgorgement -- Disgorgement advisory findings of $719 million (Papaya profit basis) or $652 million (cost savings basis), with the final amount subject to court decision and no duplicative recovery.
• Skillz Platform Content Strategy -- Skillz now owns and operates three of the top five titles, including Blackout Bingo and Domino's Gold, and is expanding into first-party content production.
• User Acquisition Cost -- Management stated "the best UA prices we have seen in...multiple years."
• Retention and Cohort Health -- Retention across three-plus-month cohorts improved sequentially, contributing to increased engagement and per-user monetization.
• RZR Expansion -- RZR added new advertisers across multiple sectors and launched a connected TV business to open a new channel for ad spend.
• Beamable Acquisition -- Completed Beamable acquisition, integrating developer platform capabilities to further enhance Skillz's ecosystem.
• Debt Maturity Strategic Review -- Management is evaluating capital structure options ahead of $130 million debt coming due at year-end.

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RISKS

• Adjusted EBITDA loss widened to $13 million due to increased litigation costs; excluding litigation costs, adjusted EBITDA improved to a loss of $7 million, representing a 15% improvement quarter over quarter on a normalized basis.
• Paying MAU declined 9% sequentially, driven by reduced user acquisition spending and fewer new cohorts.
• $130 million in debt matures by year-end, with management still determining refinancing or other strategic alternatives.

SUMMARY

The earnings call highlighted a landmark litigation outcome, with Skillz (NYSE:SKLZ) securing a $420 million false advertising award against Papaya Gaming and potential total recovery exceeding $1.2 billion depending on court determination of enhanced and disgorgement awards. RZR reported its third consecutive quarter of profitability, fueled by advertiser expansion and product innovation, including the launch of a connected TV channel. The company completed the acquisition of Beamable, adding back-end developer infrastructure and platform synergies. Management detailed a deliberate shift to first-party content ownership by acquiring top platform titles and growing its owned portfolio. The balance sheet remains liquid, but $130 million in debt maturing in 2026 prompts ongoing capital structure review.

• Management said, "retention across our more mature cohorts improved from the previous quarter," emphasizing health in core platform user engagement.
• User acquisition costs reached “the best UA prices we have seen in I,” prompting consideration of scalable marketing as costs remain attractive.
• Skillz now owns and operates three of the top five games on the platform, marking a strategic shift from third-party to first-party content control.
• RZR’s connected TV launch and incremental advertiser wins broadened reach to new customer segments, paving the way for future revenue channels.
• Management is proactively exploring refinancing and other alternatives to address the pending debt maturity, without signaling a chosen path yet.
• The jury's findings against Papaya Gaming included statements that Papaya's bots outnumber human players in tournaments, underscoring wider implications for Skillz’s peer-to-peer gaming credibility.

INDUSTRY GLOSSARY

• PMAU (Paying Monthly Active User): The number of users who made at least one real-money transaction on the platform in a given month.
• RZR: Skillz’s proprietary performance marketing and advertising technology engine offering targeted marketing services.
• Beamable: A developer platform providing backend game services and infrastructure, now owned by Skillz.
• Disgorgement: Court-ordered repayment of profits or cost savings gained unlawfully, as in the context of litigation with Papaya Gaming.
• UA (User Acquisition): Marketing outlays and strategies to attract new players to the Skillz platform.

Full Conference Call Transcript

Andrew C. Paradise: Thank you, Joe, and good afternoon, everyone. I will begin today's call with a review of our first quarter results. For the first quarter, GAAP revenue was $29 million, down 3% quarter over quarter. And up 33% year over year. Adjusted EBITDA loss was $13 million compared to a loss of $10 million in the fourth quarter. The increase in adjusted EBITDA loss is driven by higher litigation related expenses during the quarter. Importantly, excluding litigation related expenses, adjusted EBITDA in Q1 26 improved to a loss of $7 million representing a 15% improvement quarter over quarter on a normalized basis. At RZR, adjusted EBITDA was $2 million, marking a third consecutive quarter of profitability.

We expect this improvement in underlying profitability across our pro as we continue to move into the second quarter. Paying MAU for the Skillz platform was 128 thousand down 9% quarter over quarter. And up 3% year over year. This quarterly sequential decline in PMO was partly driven by our decrease in UA spend, resulting in fewer new user cohort additions. While top line PMO has decreased, we are encouraged that retention across our more mature cohorts improved from the previous quarter. This reflects a healthier platform demonstrated by our 7% quarter over quarter increase in average revenue per paying user. Moving to our fair play initiative and an update on our litigation against Papaya Gaming.

In April, a unanimous jury in the US district court for the Southern District of New York found papaya liable for false advertising under the Lanham Act and deceptive under New York law. awarding Skillz, $420 million in actual damages. The largest false advertising award in US history under the Landon Act. The jury also made advisory findings supporting disgorgement of either $719 million based on papaya's profits or $652 million based on Papaya's cost savings. These are alternative theories and will not be added together. Court will determine whether to award disgorgement, and if so, the final amount.

It may accept, modify, or decline the advisory finance entirely, ensuring there is no duplicative recovery where actual damages and distortion overlap. Under the Lanham Act, court has the ability to enhance the actual damages award by up to 3x to $420 million. For any disgorgement, the court chooses to award there is no cap on enhancing. In simple terms, the total potential award ranges from $420 million to over $1.2 billion depending on the court's determination on disclosure and enhancement. To understand what this verdict means for the category we pioneered, it helps to understand some of the why. Skillz founded the skill based competitive gaming category on a single premise.

The players compete fairly against real human opponents for real prizes. As the category grew, we saw competitors gaining market share in ways that defied explanation. This turned out to be what we believe to be fraud. We had to use the legal system to fight back on behalf of our players and our shareholders. What we alleged against 1 of these competitors was confirmed by Papaya's own internal documents. Bots were being deployed at scale. Bot scores selected by Papaya had determined the outcomes. And none of it was disclosed to the players. I remind you, we have taken this path before.

In 2024, a federal jury found that AviaGames liable for patent infringement and awarded $42.9 million in damages. We subsequently pursued a separate false advertising case against AviaGames. And the 2 cases ultimately sell together for $80 million. We applied those learnings and brought Papaya to trial and false advertising grounds directly. The evidence at trial is clear. Papaya's bots outnumber human players. Across tournaments advertising approximately $6.7 billion in prize pools, Only about $2 billion was actually paid to real users. Leaving roughly $4.7 billion in, quote, imaginary money, quote. A term used by Papaya's own defense counsel that was never paid to human players. The jury's verdict confirms that these practices violate the Lanham Act false advertising standards.

We founded this industry we remain committed to ensuring that fair competition is the standard every participant is held to. On collectability, based on publicly available data, Apaya operates at substantial scale with leading titles ranking among the most downloaded in The US, generating significant revenue. Casey on independent analyst coverage notes, Papaya's annual net revenue is approximately $950 million to $1.1 billion. We believe this scale supports Vopaya's capacity to satisfy a judgment of its size. Looking ahead, we expect that the court will determine the final discouragement award in June. The parties have been ordered to engage in settlement discussions, which were pursuing.

Gaetano Franceschi: We are also evaluating alternatives to secure capital against the judgment.

Andrew C. Paradise: And are monitoring closely whether an appeal bond or other secured capital would be required This verdict confirms that false advertising is skill-based gaming category violates federal law. We believe the papaya verdict supports the integrity of the category and may improve competitive dynamics over time. Our litigation against Voodoo continues to proceed on the same principles of fair play. The Papaya verdict is a significant milestone and our focus remains on operating and growing our business. As we move through 2026 we are organizing our execution around 3 core initiatives that build on the foundation established during our turnaround. First, strengthen demand and engagement. Second, execute a more efficient and disciplined go to market.

And third, improve our platform performance and infrastructure. Across each of these initiatives, we are leveraging the Skillz competition platform RZR's performance marketing engine, and Beamable, our newly acquired developer platform. Together, our businesses are building a connected ecosystem designed to improve performance and drive efficiency. Turning to our first initiative, strengthening demand and engagement. On the Skillz platform, we remain focused on quality and long term value. We saw continued strength in our core player base particularly among longer tenured cohorts. Retention across our 3-plus-month cohorts improved quarter over quarter, driving higher engagement and monetization on a per user basis. This reflects the underlying health of the platform.

Solitaire Skillz continues to scale as a top title on the platform. We also strengthened our owned content portfolio through the acquisitions of Blackout Bingo and Domino's Gold. And are expanding the pipeline with new titles launching later this year. At RZR engagements driven by precision targeting and performance marketing in scale. We added several new advertisers across gaming, consumer applications, retail, and entertainment. We grew revenue across both new and existing customers and launched our connected TV business, opening a new channel for advertiser spend. Turning to our second initiative. Efficient and disciplined go to market. On the Skillz platform, we remain focused on executing an efficient and disciplined go to market strategy.

In Q1, user acquisition spend continued to focus on attracting profitable long term players. Our approach reflects concentrating investment in channels with attractive returns. At RZR, we continue to scale our performance expanding our advertiser base and deepening relationships with existing clients. During the quarter, we continued to optimize media margins through improved product mix. Our machine learning platform continues to drive stronger targeting efficiency and return on ad spend for advertisers. Additionally, the launch of Connected TV has attracted initial advertiser commitments, broadening RZR's addressable market and opening a new channel for advertising spend. Turning to our third initiative, improving the performance and infrastructure. On the Skillz platform, we continue to invest in systems supporting player engagement.

We are also advancing our Pro SDK development with several developers building new games or converting existing games using this technology. During the quarter, RZR continued migration to more advanced neural network models. Improved training efficiency and prediction accuracy, expanded integrations with measurement partners, and advanced next generation machine learning infrastructure. In Q1, we completed the acquisition of Beamable, a developer platform providing the game services and back end infrastructure that we believe will power skills over time. Beamable will join with RZR and the Skillz competition platform as the third component of a connected ecosystem. Bringing developer tooling to our own products and to the customers that RZR brings into the network.

Beamable also continues to serve the developers and studios that relied on the platform prior to the acquisition. Taken together, our businesses form a compounding flywheel. We believe that the campaigns improve the model, Every impression strengthens targeting. And every outcome improves future performance. In closing, the first quarter reflected disciplined execution across the organization. We strengthened the Skillz platform, improved unit economics, continued to scale RZR as a profitable growth engine, and began integrating Beamable as the developer platform powering our product ecosystem over time. By combining competitive skill-based gaming with AI-driven performance marketing, We are building an ecosystem designed to scale engagement data, and monetization with discipline.

We believe this integrated approach creates long term optionality in gaming as well as in adjacent areas where content identity, commerce, and performance marketing converge. Our focus remains on executing against that opportunity while maintaining financial discipline and driving long term shareholder value. And with that, I will turn it over to Gaetano for the financial review.

Gaetano Franceschi: Thank you, Andrew. Our first quarter results highlight the benefits of disciplined execution and structural improvements across both the Skillz and RZR businesses. Producing stronger fundamentals and a trajectory toward profitability. Q1 26 GAAP revenue was $29 million, down from $30 million in Q4 25 and up from $22 million in Q1 25. Representing a 3% decline quarter over quarter and 33% growth year over year. Of note, Q4 2025 revenue included an indirect tax accrual release Normalizing for the indirect tax accrual release, Q1 26 revenue would be up 2% quarter over quarter. Q1 26 research and development expenses of $5 million increased 5% year over year. Reflecting ongoing investment in our Skillz and RZR businesses.

Q1 26 sales and marketing expenses of $17 million decreased 4% year over year. In the quarter, user marketing was $8 million, user acquisition was $3 million. Q1 26 general and administrative expenses of $19 million increased 2% year over year. Q1 26 net loss of $11 million improved 36% year over year. Q1 adjusted EBITDA loss was $13 million compared to a loss of $10 million in Q4 25 and improved from a loss of $17 million in Q1 25. Excluding litigation related expenses, adjusted EBITDA in Q1 26 improved to a loss of $7 million. Representing a 15% improvement quarter over quarter on a normalized basis.

We believe our balance sheet remains healthy, and we continue to manage capital prudently. As we progress towards sustained profitability. We ended Q1 26 with $185 million in cash and cash equivalents and $130 million of debt outstanding due by the end of this year. As the debt approaches maturity later this year, we continue to evaluate a range of strategic alternatives to optimize our capital structure. We are driving the business forward with focus and discipline to deliver meaningful, long term value for our shareholders. And look forward to updating you further on our progress in 2026.

Andrew C. Paradise: Operator, we are now ready to open the line for questions.

Operator: Thank you. Everyone, if you would like to ask a question, please press 1 on your telephone keypad. We will take the first question today from Edward Alter from Jefferies. Hi.

Analyst (Ed Alter): Good afternoon. I want to ask a question on paying MAU and GMV. I saw that actually, GMV was actually up quarter on quarter despite kind of paying users down. So can you just talk about kind of the 2 drivers of that and why the spend per player is actually increasing and kind of some of the drivers there?

Gaetano Franceschi: Thanks, Edward. Thanks for the question. Yeah. I think as you know, what we focus on is really high paying users long term users. And so this is sort of a view of an outcome that we have been driving towards. And trying to continue to retain and attract high paying users. So you see even though our PMAU is slightly down, you can see our GMV continues to grow and our ARPU continues to grow.

Andrew C. Paradise: And if I could also jump in. Please do. Oh, sorry. I was going to add that 1 of the reasons, PMAO is slightly down is we actually dialed back user acquisition in Q1. continuing to raise our focus on profitable acquisition. So continue to bring in tighter and tighter breakeven periods and better 1 year paybacks. We are you know, I think we are kind of at maximum tight now. As we ended the quarter, and, you know, we are thinking about how to thoughtfully expand on marketing.

Gaetano Franceschi: Yeah. Great. Great.

Analyst (Ed Alter): And just to follow-up on that because I noticed that the, you know, the MAUs was also down a decent amount but a lot of the, you know, nonpaying MAUs were down. That kind of a new normal for kind of your marketing strategy or just kind of how do we go from here is, I guess, kind of the main question.

Andrew C. Paradise: Yeah. I think it is where we are on user acquisition and kind of cutting spend and optimizing, you can expect us that we are stabilized and going to build forward. So you would-- I would expect PMO and traffic overall flat to up with improving unit economics. that is the way I would think about the business. it is you know, at the end of the day, if we can service a higher value customer, it is a better business.

Analyst (Ed Alter): Great. Thanks. I can circle back in the queue.

Andrew C. Paradise: Yep.

Operator: The next question is from the next question comes from Bharat Nagaraj from Cantor Fitzgerald.

Analyst: Hi. Thank you for taking my questions. Just the first 1 is around, are you seeing any reduction in user acquisition costs at all since the lawsuit went in your favor? And then the second 1, just to on the previous answer that you provided to the previous question, what would you attribute the growth in paying MAUs since Q1 25. Right? Like, it is kind of been pretty good since then and up until Q1 26. Is it is it because the mobile gaming environment is a lot better now? Or is it is it some kind of a change in strategy?

And I note that the user acquisition costs have come down as well as you mentioned, so hence, to understand that a bit better. Thank you.

Andrew C. Paradise: Yeah. Thank you for the question. As I am we hit the first part on user acquisition cost since the lawsuit. You know, I think it would be really difficult for us to directly link the 2 and create attribution there. In terms of user acquisition costs, we are at you know, as of Q1, the best UA prices we have seen in I do not know how many years, multiple years. So we are you know, we are seeing attractive customer acquisition costs. Thinking about how we can thoughtfully scale up where we are seeing the, you know, these attractive prices.

In terms of the second question, attributing growth to paying PMAU, and how, you know, how PMAU has been growing from Q1 25 through this past quarter. Perhaps, Gaetano, do you wanna jump in on that?

Gaetano Franceschi: Yeah. Thanks, Andrew. I think the way to think about it and how we have been describing for the past several quarters is really the focus around you know, product led growth. And so there is been a significant number of investments and things that we have launched that are really focused around attracting and retaining paying customers. And so I think you are seeing that as a result. That, you know, that our focus on paying now is paying off.

Analyst: Okay. Okay. Thank you. Can I ask 1 more if that is alright, or should I just jump back in the queue?

Operator: No, no, go ahead.

Andrew C. Paradise: I know that I think couple of your developing partners, I think you have said account for, like, a significant portion of your revenue. And I think if I am not wrong, correct me there if I am wrong, Solitaire Cube and 21 Blitz will kind of drop off the platform in January 2027. So I am just wondering what the future strategy is there. I think you are trying to develop some of your own games, but is there how do we think about the trajectory of revenue post I do not know, Q4 this year? Yeah. Thank you for the question on that.

So to kind of herd it back, how are we thinking about you know, the migration of 1 of our developer off platform We now as of Q1, we acquired, Blackout Bingo and Domino's Gold. So we own and operate now 3 of the top 5 titles in the platform. And you know, this actually happened in Q3 of last year, but when that particular developer left the platform, you know, they had 34 titles there, 2 of which we have contractual rights through March 2027. And then the other 32 which we had contractual exclusivity up through December. We migrated the first 32 titles in Q3. So in quarter.

And so you can see kind of the result of that in our numbers. We are now looking at in particular, I think you mentioned Solitaire Cube, but looking at the migration to future state. And we have, you know, quite a number of solitaire titles on platform as well as the owned and operated title Solitaire Skillz.

Analyst: Understood. Thank you very much.

Operator: And we will take a follow-up from Edward Alter from Jefferies.

Analyst (Ed Alter): Great. Thanks for letting me back in. I just wanted to, yeah, follow-up on the last question. You know, with you guys now making your own solitaire game, buying Blackout, and Domino's Gold, Seems like a decently large strategy shift to now you guys own most of the large games on the platform. Is this how to think about the business going forward or just some of the rationale for doing that-- kind of that shift?

Andrew C. Paradise: Yeah. Thank you for the question. But, you know, I would say, yes. Owning and operating is a shift from the historic only third party and second party relationships with developers. You may be aware that we have been, you know, second party investor in content. For a number of years. I wanna say, you know, over 5 years pre IPO. We have owned a stake in content on the platform. Now owning and operating, if you think about first party, second party, third party, now we are entering into first party relationships with content, so owned and operated.

And the way we think about this, is if there is a category on the system and a piece of content like Solitaire, there is relatively little development in the future.

Acquiring a developer or a developer's game or building a game in that category, you know, it creates a stability for the platform and a consistent offering that we can have on the platform, which actually is a benefit to every developer on the platform who is building new content and exploring new genres. it is very much a strategy that, you know, I think we have seen with whether it is you know, Epic at a much larger scale running Fortnite, or it is, it is Valve with, you know, with Steam, their platform running Dota 2 and Counter Strike. I think this is a common thing.

In the gaming industry in terms of gaming platforms and something that you know, we think makes a lot of sense for the future of the business.

Analyst (Ed Alter): Great. Thanks.

Operator: And everyone, at this time, there are no further questions. This does conclude our conference for today. We would like to thank you all for your participation. You may now disconnect.

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