SKLZ — Skillz Inc.

Summary of Skillz, Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• GAAP Revenue: $29 million, down 3% quarter-over-quarter but up 33% year-over-year.
• Adjusted EBITDA: Loss of $13 million, worsening from a loss of $10 million in Q4 2025, primarily due to increased litigation expenses. Excluding these expenses, adjusted EBITDA improved to a loss of $7 million, a 15% improvement quarter-over-quarter.
• Paying Monthly Active Users (MAU): 128,000, a decline of 9% quarter-over-quarter but an increase of 3% year-over-year.
• Average Revenue Per Paying User (ARPU): Increased by 7% quarter-over-quarter, indicating improved monetization.
• Cash Position: $185 million in cash and cash equivalents, with $130 million of debt maturing by the end of 2026.

2. Strategic Updates and Business Highlights

• Litigation Success: A jury awarded Skillz $420 million in damages against Papaya Gaming for false advertising, with potential total awards exceeding $1.2 billion depending on court decisions regarding disgorgement.
• Core Initiatives: Focus on three strategic areas:
  • Strengthening demand and engagement.
  • Executing a disciplined go-to-market strategy.
  • Improving platform performance and infrastructure.
• Acquisitions: Acquired Blackout Bingo and Domino's Gold, enhancing the company’s own game portfolio and transitioning to first-party content ownership.
• RZR Performance: Achieved $2 million in adjusted EBITDA, marking a third consecutive quarter of profitability.

3. Forward Guidance and Outlook

• Skillz anticipates continued improvement in underlying profitability and user engagement as it moves into Q2 2026.
• The company is focused on optimizing user acquisition strategies and expects to stabilize and potentially grow MAUs and traffic moving forward.

4. Bad News, Challenges, or Points of Concern

• Litigation Costs: Increased litigation-related expenses contributed to the wider adjusted EBITDA loss.
• Declining Paying MAUs: A 9% decrease in paying MAUs raises concerns about user acquisition effectiveness, attributed to reduced user acquisition spending.
• Debt Maturity: The $130 million debt due later in 2026 poses a potential risk if not managed effectively.

5. Notable Q&A Insights

• User Acquisition Costs: Management noted that user acquisition costs have improved significantly, but they are cautious about linking this to the favorable lawsuit outcome.
• Growth in Paying MAUs: The growth in paying MAUs since Q1 2025 is attributed to a focus on product-led growth and retaining high-value customers.
• Shift to First-Party Content: The transition to owning and operating games is seen as a strategic pivot to stabilize revenue and enhance offerings on the platform, aligning with industry trends.

Overall, Skillz demonstrated strong year-over-year revenue growth and strategic shifts towards ownership of game content, despite facing challenges with user acquisition and litigation costs. The company remains focused on improving profitability and user engagement as it navigates its growth trajectory.