Skillz Aktie

I'm proud to share that Skillz Inc. has rebranded to Firy Inc. with a ticker change to FIRY going into effect on June 22. For those of you who are new to our story, I'm Andrew Paradise, CEO and Founder of Firy. Firy is the rebirth of our company.

It reflects the real evolution of how we operate, how we think and what we're building. It represents something deeper than a rebrand. The name comes from imagery of a Phoenix Rising, something that burns intensely, takes everything thrown at it and it comes out the other side transformed. You're going to laugh, but the runner-up was Bennu, which is ancient Egyptian for Phoenix. It really didn't roll off the tongue, so it landed on Firy, Old English for "fiery" to burn brightly.

For a company that's been through what we've been through, fought the way we fought and come out building something more exciting than what we started with, the name felt appropriate for the next chapter of our 100-year journey. And now a message from our attorneys.

Our timeline has two stories I want to tell. One about our company and one about the industry we formed. Starting with our company. Skillz built a category that didn't exist. Pre-2012, if you want to compete in a mobile game for real prizes, you simply couldn't. With 90-plus patents and 110 pending, we created the category. We were told it would be a $200 million category in the next 10 years. Today, it's over $15 billion.

By 2017, we won the Inc. 5000 as the #1 fastest-growing company at 50,000 applicants. In 2020, we took the company public on the New York Stock Exchange. We built and won the category we created.

Now the second story. After we went public, we found new competitors concerned businesses running bots instead of having real players. These companies were defrauding the market we created. And we proved it in 2024 against AviaGames and settled our lawsuits with them for $80 million.

In April of '26, we proved it again against Papaya Gaming and a federal jury awarded us over $420 million, the largest false advertising verdict in U.S. history.

Subsequently, we've requested the court award of enhanced damages of over $1.4 billion, which we expect the final judgment this year. While we navigated these bad actors, we kept building, the company that was attacked fought back and won, is the one standing in front of you today. So with that out of the way, let's move into our portfolio.

Skillz is a pioneer in mobile skilled gaming. In '21, we acquired RZR, our AI performance advertising platform. In '26, we acquired Beamable, our back-end LiveOps infrastructure for game developers, 3 businesses, each growing on its own.

Our businesses are complementary and they serve the same customer, the game developer. Skillz handles monetization and competition. RZR handles user acquisition and retargeting, Beamable handles infrastructure and LiveOps. Same potential customer, 3 different moments in their journey. No other platform brings together real money gaming infrastructure, performance advertising and developer lifecycle tooling, all under one operating structure.

Each of these businesses can succeed independently, but the opportunity comes from how they strengthen each other. So here's how the flywheel works. RZR brings the players, Skillz brings the developers and the competitive gaming infrastructure, Beamable captures and operationalizes the data.

More players attract more developers, more developers create more games and more content, more games generate more data and more data makes every product in the portfolio better. Better products drive better monetization and retention and better retention attracts more players and then the cycle starts again. It's a 3-sided network effect. Each side strengthens the other 2. It's an advantage that accelerates with every player, every developer, every data point added to the system.

Most businesses become more valuable because they get bigger. We believe Firy becomes more valuable because it gets smarter. That's how we uniquely create enhanced profitability over time. We launched Firy because investors don't yet understand the fundamental shift in where our businesses are going. Skillz remains this important business to us and will continue as our gaming sub-brand, but Skillz is no longer the full story.

Firy is the technology company that we've been building underneath it. So here's why we believe this is a superior operating structure. Each business runs independently, serves its own third-party customers, builds its own products and generates its own revenue, but each also has the opportunity to strengthen the others. We don't force the businesses to work together. We organize them so they can.

Cross-selling where it creates value, sharing best practices where it creates leverage, building interoperability where it creates advantage. The benefit flows in both directions without creating dependency. The economics are the proof our strategy is working. The businesses are growing and becoming more profitable. Revenue is forecast to more than double from 2025 to 2028.

Cash generation improves every year, and we're moving from stabilization to growth. Before I take you through each business individually, I want to explain how they help each other reach their full potential. Skillz is evolving into a social network built around competition. Beamable helps Skillz get there by providing the engagement, CRM and lifecycle tools needed to deepen player relationships.

RZR helps Skillz get there by making player acquisition, retention and monetization more efficient. RZR benefits from something no stand-alone advertising platform can easily replicate, scaled first-party data, real customer behavior and real transaction behavior. Beamable benefits from assets that already exist inside the Firy ecosystem. Skillz payment rails, compliance infrastructure and identity extend into Beamable.

Every new game, every new player, every new signal improves Firy's competitive moat. So let's step back for a moment. Gaming is one of the first and earliest digital businesses. The product, the customer, the experience is digital. There are very few industries that place greater demands on technology in the world, payments, real-time systems, matchmaking, engagement. Developers have historically pushed these technologies forward because their products required it.

That's why gaming has consistently been one of the most innovative sectors on the Internet and why the infrastructure serving game developers matters so much.

So with that out of the way and that overview, let's start with walking through Skillz. This is where the story began, and it remains the foundation of the Firy ecosystem. Skillz is often misunderstood as just a gaming business. It's much more. It's a competition infrastructure platform that lives inside of games. We have more than 90 issued patents with one patent already enforced in court. We have an additional 110 pending. This isn't just a feature set. It's an IP moat, and it becomes wider every year as we continue to pioneer.

The platform continues to evolve. Today, we operate across first-party, second-party and third-party content. Three of our top five titles on the platform by revenue are now owned and operated by Skillz. We have 90 million lifetime users, 6 million-plus payment accounts. This is almost entirely U.S. based.

We have a deep relationship with the consumer on an active media platform. And competition is inherently social. People compete against friends and they seek community. Our vision is to turn this gaming experience into a social network over time. Skillz Arena, which just has launched is our single app product. It's the hub. The games and the content act as the spokes. Every player and game strengthen this network. Every user brings the same identity, wallet, social graph, competitive history as they move across these products.

The platform acts as the infrastructure for what we're building into a network. Okay. Now that I've explained Skillz future, let's move to RZR. This is the fastest-growing business in Firy's portfolio. So we acquired RZR in 2021. We rebuilt the platform from the ground up, new machine learning systems, leadership and architecture.

Today, RZR is innovating in its space and releasing self-funded products. The data advantage behind it is real. Skillz has spent more than a decade building relationships with real money players, real signals that most advertising platforms never have access to. That data feeds the system.

The system gets smarter and smarter models produce better outcomes for RZR's customers. The longer the platform operates, the more products it can offer, the stronger the advantage becomes. The predominance of all advertising platforms were built prior to the AI era, just as trading floors were built for human decision-making before algorithmic trading.

Salespeople and traders on Wall Street once operated dashboards, analyzed reports, made decisions, Ad buyers and sellers have been doing the same up until very recently. And when Wall Street was disrupted, they didn't just add machine learning and technology on top of old infrastructure.

They rebuilt for quant models, systematic execution, machine-driven outcomes, things like high-frequency trading were born. The ad industry in the last 5 years is undergoing a similar transition. Rebuilding RZR in '22 to '24 for AI makes it one of the first intelligent systems that will make those decisions. And the future looks different in the agentic world. The winners will not have the best dashboards. They'll have the best data models, the best infrastructure and the ability to operate on behalf of the buyer and the seller to optimize inventory.

That quadrant remains relatively scarce for competition today, and we believe RZR is positioned to get there first. Okay. Now that I've walked through Skillz and RZR, let's move to Beamable. This is the newest business in the Firy portfolio. Beamable, in many ways, completes our ecosystem.

Beamable brings decades of experience in the game developer community into our business. The products today provide developer infrastructure, live services, analytics, identity and operational tooling. The common theme is making the developer's life easier. Developers spend less time managing infrastructure, more time focusing on building great content.

This is very aligned with the mission for Skillz and for RZR of enabling the developer. Beamable serves a wide array of game developers and brings a book of business to our company that is entirely different from RZR and from Skillz. When Beamable, Skillz and RZR work together, the data connects, the capabilities expand and the value of the ecosystem increases. Over time, we'll broaden Beamable's offering from LiveOps, which is an industry term for engagement marketing to offer more of core Skillz systems.

Skillz payment rails, compliance, identity, they can all be extended into Beamable's service offering. Beamable is building infrastructure technologies for the gaming industry with Skillz as a first customer, and every tech we build gets market validated by Skillz.

Skillz already created a multibillion-dollar category, survived the attack, quietly rebuilt and is now emerging to continue our journey to build a 100-year company.

Today, we operate across competition, advertising and developer infrastructure. Tomorrow, we may expand to adjacent categories such as payments, identity and e-commerce.

We're building systems that compound through network effects, and I believe we're still much closer to the beginning than the end. We started Skillz in 2012 on a simple conviction, that competition makes games better and that Skillz should be the thing that wins. That conviction built a platform, then a business, then a category.

The last few years tested whether the company could outlast its own ambition. It did. We rebuilt the foundation. We brought discipline to the model. We proved the unit economics work in the open.

So what comes next isn't a recovery story. It's a company with a platform and ad engine and the tools to build on both pointed at one of the largest entertainment markets on earth. I've been building this company since 2012 through every chapter, the good and the hard. And I believe the next one is the most interesting yet.

Thank you.

Good afternoon, everyone. I'd like to welcome you to the Skillz Inc. First Quarter 2026 Results Call. At this time, I would like to turn the conference over to your host, Joe Jaffoni from JCIR to begin.

Good afternoon, everyone. Skillz issued its 2026 first quarter earnings release on May 15, which is available on the company's Investor Relations website. Let me read the safe harbor language, and then we'll get right into the call.

All statements and comments made by management during this conference call other than statements of historical fact may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Skillz cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during the call. For additional details on these risks and uncertainties, please see Skillz annual report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission and Skillz subsequent public filings with the SEC.

Skillz undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, we will reference various non-GAAP financial measures and KPIs during this call. Please refer to our earnings release for an explanation of these measures and how we use them and in the case of the non-GAAP financial measures, reconciliations to their nearest GAAP equivalents.

It's now my pleasure to turn the call over to Skillz CEO, Andrew Paradise. Andrew, please go ahead.

Thank you, Joe, and good afternoon, everyone. I'll 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 was driven by higher litigation-related expenses during the quarter. Importantly, excluding litigation-related expenses, adjusted EBITDA in Q1 2026 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 portfolio as we continue to move into the second quarter. Paying MAU for the Skillz platform was 128,000, down 9% quarter-over-quarter and up 3% year-over-year. This quarterly sequential decline in PMAU was partly driven by our decrease in UA spend, resulting in fewer new user cohort additions. While top line PMAUs decreased, we're 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, the unanimous jury in the U.S. District Court for the Southern District of New York found Papaya 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. history under the Lanham 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.

The court will determine whether to award disgorgement and if so, the final amount. It may accept, modify or decline the advisory findings entirely, ensuring there is no duplicative recovery where actual damages and disgorgement overlap. Under the Lanham Act, the court has the ability to enhance the actual damages award by up to 3x the $420 million. For any disgorgement, the court chooses to award, there is no cap on enhancement. In simple terms, the total potential award ranges from $420 million to over $1.2 billion, depending on the court's determination on disgorgement 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 at 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 defy 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 one of these competitors was confirmed by Papaya's own internal documents. Bots were being deployed at scale. Bot scores selected by Papaya determined the outcomes and none of it was disclosed to the players.

I remind you, we've taken this path before. In 2024, a federal jury found AviaGames liable for patent infringement and awarded $42.9 million in damages. We subsequently pursued a separate false advertising case against Avia, and the 2 cases ultimately settled together for $80 million. We applied those learnings and brought Papaya to trial on false advertising grounds directly. The evidence of 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 "imaginary money," a term used by Papaya's own defense council, 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, and we remain committed to ensuring that fair competition is the standard every participant is held to.

On collectibility, based on publicly available data, Papaya operates at substantial scale with leading titles ranking among the most downloaded in the U.S., generating significant revenue. Based on independent analyst coverage notes, Papaya's annual net revenue is approximately $950 million to $1.1 billion. We believe this scale supports Papaya's capacity to satisfy a judgment of this size. Looking ahead, we expect that the court will determine the final disgorgement award in June. The parties have been ordered to engage in settlement discussions, which we're actively pursuing. We're also evaluating alternatives to secure capital against the judgment and are monitoring closely whether an appeal bond or other secured capital will be required. This verdict confirms that false advertising in 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 games 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're 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 Dominoes Gold and are expanding the pipeline with new titles launching later this year. At RZR, engagement is driven by precision targeting and performance marketing at 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 platform performance and infrastructure. On the Skillz platform, we continue to invest in systems supporting player engagement. We're 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 Skillz over time. Beamable joins RZR and the Skillz competition platform is the third component of our connected ecosystem, bringing developer tooling to our own products and to the customers 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 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, continue to scale RZR as a profitable growth engine and began integrating Beamable as the developer platform powering our products and ecosystem over time. By combining competitive skill-based gaming with AI-driven performance marketing, we're 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'll turn it over to Gaetano for the financial review.

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 2026 GAAP revenue was $29 million, down from $30 million in Q4 2025 and up from $22 million in Q1 2025, 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 2026 revenue would be up 2% quarter-over-quarter.

Q1 2026 research and development expenses of $5 million increased 5% year-over-year, reflecting ongoing investment in our Skillz and RZR businesses. Q1 2026 sales and marketing expenses of $17 million decreased 4% year-over-year. In the quarter, end-user marketing was $8 million and user acquisition was $3 million. Q1 2026 general and administrative expenses of $19 million increased 2% year-over-year. Q1 2026 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 2025 and improved from a loss of $17 million in Q1 2025. Excluding litigation-related expenses, adjusted EBITDA in Q1 2026 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 2026 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.

Operator, we're now ready to open the line for questions.

[Operator Instructions] We'll take the first question today from Ed Alter from Jefferies.

I wanted 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?

Thanks, Ed. Thanks for the question. Yes, 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've 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 ARPPU continues to grow.

And if I could also jump in -- sorry, I was going to add that one of the reasons PMAU is slightly down is we actually dialed back user acquisition in Q1, really continuing to raise our focus on profitable acquisition. So continuing to bring in tighter and tighter breakeven periods and better 1-year paybacks. We're -- I think we're kind of at maximum tight now as we ended the quarter, and we're thinking about how to thoughtfully expand on marketing.

Yes. Great. Great. And just to follow up on that because I noticed that the MAUs was also down a decent amount, but a lot of the non-paying MAUs were down. Is that kind of like a new normal for kind of your marketing strategy? Or just how do we go from here is, I guess, kind of the main question.

Yes. I think it's -- with where we are on user acquisition and kind of cutting spend and optimizing, you can expect that we're stabilized and going to build forward. So I would expect PMAU and traffic overall flat to up with improving unit economics. That's the way I think about the business. It's -- at the end of the day, if we can service a higher-value customer, it's a better business.

The next question comes from Bharath Nagaraj from Cantor Fitzgerald.

Just the first one is around, are you seeing any reduction in user acquisition costs at all since the lawsuit went in your favor? And then the second one, just a follow-up on the previous answer that you provided to the previous question. What would you actually attribute the growth in paying MAUs since Q1 2025, right? Like it's kind of been pretty good since then and up until Q1 2026. Is it because the mobile gaming environment is a lot better now? Or 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, wanting to understand that a bit better.

Yes. Thank you for the question. So let me hit the first part on user acquisition costs and some lawsuit. 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 -- as of the end of Q1, the best UA prices we've seen in, I don't know how many years, multiple years. So we're seeing attractive customer acquisition costs and thinking about how we can thoughtfully scale up where we're seeing these attractive prices.

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

Yes. Thanks, Andrew. I think the way to think about it and what we've been describing for the past several quarters is really the focus around product-led growth. And so there's been a significant number of investments in our platform around retention and engagement and things that we've launched are really focused around attracting and retaining paying customers. And so I think you're seeing that as a result that our focus on paying MAU is paying off.

I note that -- I think a couple of your development partners, I think you have said account for like a significant portion of your revenue. And I think if I'm not wrong, correct me there if I'm wrong, Solitaire Cube and 21 Blitz will, kind of, drop off the platform in Jan 2027. So I'm just wondering what the future strategy is there. I think you're trying to develop some of your own games, but is there -- how do we think about the trajectory of revenue post, I don't know, Q4 this year?

Yes. Thank you for the question on that. So to kind of hear it back, how are we thinking about the migration of one of our developers off platform. We now -- as of the end of Q1, we acquired Blackout Bingo and Dominoes Gold. So we own and operate now 3 of the top 5 titles in the platform. And this actually happened in Q3 of last year. But when that particular developer left the platform, there were 34 titles, 2 of which we have contractual rights through March of 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 quite a number of Solitaire titles on platform as well as the owned and operated title, Solitaire Skillz.

And we'll take a follow-up from Ed Alter from Jefferies.

I just wanted to follow up on the last question. With you guys now making your own Solitaire game, buying Blackout and Dominoes Gold, it 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 kind of some of the rationale for doing that kind of that shift?

Yes. First of all, thank you for the question. But 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've been a second party or investor in content for a number of years. I want to say, over 5 years pre-IPO, we've owned a stake in content on the platform. Now owning and operating, so if you think about first party, second party, third party, now we're entering into first-party relationships with content, so owned and operated.

And the way we think about this is if there's a category on system and a piece of content like Solitaire, where there's relatively little development in the future, acquiring a developer or developer's game or building a game in that category, it creates a stability for the platform and a consistent offering that we can have for the platform, which actually is a benefit to every developer on the platform who's building new content and exploring new genres. It's very much a strategy that I think we've seen with whether it's Epic at a much larger scale running Fortnite or it's Valve 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 we think makes a lot of sense for the future of the business.

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.

Good afternoon. I'd like to welcome you to the Skillz, Inc. Fourth Quarter and Full Year 2025 Results Call. I will now turn the conference over to your host, Joseph Jaffoni from JCIR to begin.

Thank you, operator, and good afternoon, everyone. Skillz has issued its 2025 fourth quarter and full year earnings release, which is available on the company's Investor Relations website. Let me read the safe harbor language, and then we'll get right into the call.

All statements and comments made by management during this conference call other than statements of historical fact may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Skillz cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during this call. For additional details on these risks and uncertainties, please see Skillz annual report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission and Skillz subsequent public filings with the SEC. Skillz undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Thank you, Joe, and good afternoon. I'll begin today's call with an overview of our fourth quarter and full year 2025 financial performance. For the fourth quarter of 2025, GAAP revenue was $30 million, up 11% from $27 million in the third quarter and up 67% from $18 million in the prior year period. Adjusted EBITDA loss was $10 million compared to a loss of $12 million in the third quarter and a loss of $17 million in the prior year period. These results marked four consecutive quarters of sequential revenue growth and two consecutive quarters of year-over-year revenue growth. For the full year 2025, GAAP revenue was $105 million, up from $93 million in 2024, which represented 13% year-over-year growth. Adjusted EBITDA loss was $51 million compared to a loss of $61 million in 2024, which represents a 16% year-over-year improvement.

A key driver of 2025 was our AI ad tech segment, RZR, which was rebranded from Aarki last month. RZR delivered 146% net revenue growth year-over-year. And for the first time since its 2021 acquisition, it generated positive adjusted EBITDA for the full year 2025. In addition to the headline growth, we're encouraged by RZR's performance and momentum supported by stronger systems, deeper advertiser relationships and disciplined channel growth. Moving on to our 4 business pillars. The first pillar, enhancing the platform for player and developer engagement. On the Skillz platform, we continue to invest in new content and strengthen the developer experience. Last month, at the Annual Game Developers Conference in San Francisco, we debuted our Pro SDK product.

Our Pro SDK architecture expands our development framework and provides developers with full creative control of the entire gameplay experience. It also strengthens monetization capabilities through meta game systems while leveraging the competition infrastructure and secure layer that power the Skillz platform. Turning to RZR. Over the past two years, we focused on modernizing its technology stack and scaling its infrastructure. RZR is evolving into a scaled performance marketing platform with meaningful monetization capabilities across the broader digital ecosystem. RZR is improving its machine learning training capacity and improving auction level intelligence across the platform.

Building on the data models introduced in Q2 of 2025, RZR is expanding its retargeting and user acquisition share and improving performance across channels. Moving to our second pillar, up-leveling our organization. Operational efficiency continues to improve across both Skillz and RZR platforms, allowing us to better leverage our people and resources. Both businesses operate globally and are poised to execute on scaling their teams to support growth. We recently strengthened our Board of Directors with the addition of Gary Vecchiarelli and Shannon Demus. Gary serves as President and Chief Financial Officer of CleanSpark and brings extensive public company finance, capital markets and strategic planning experience supporting high-growth companies.

Shannon serves as CFO of the Americas of Light & Wonder and brings deep financial leadership experience across global gaming and digital entertainment businesses. In addition, Jeff Shouger joined the Skillz Board Advisory after serving as Chief Financial Officer of Niantic, where he helped scale the company through global expansion and strategic transactions, including its recent $3.5 billion sale of Scopely. Together, they add significant capital market expertise, gaming and platform operating experience and financial discipline as we continue to scale the business and execute on our strategies. As it relates to our third pillar, go-to-market strategy and monetization.

At Skillz, our focus remains on acquiring and retaining high-quality paying players while driving efficient monetization. Paying monthly active users or PMAU, was 141,000, down 9% from 155,000 in the third quarter and up from 110,000 in the prior year period, which represented 28% year-over-year growth. For RZR, machine learning enhancements together with improved bidding efficiency and campaign optimization have contributed to margin expansion. RZR is meeting customer demand by advancing its product capabilities. Importantly, RZR's revenue growth is coming from both existing and new customers.

For our fourth pillar, path to profitability. With RZR achieving positive full year adjusted EBITDA paired with continued improvements across the Skillz platform, we're making progress on our path to profitability. Let's now move to an update on our Fair Play initiative. As we've discussed and disclosed previously, protecting players and preserving fair competition remain core to our values as the pioneers of the skill-based gaming category.

We continue to pursue litigation against Papaya Gaming and Voodoo Gaming for their alleged use of bots, a practice we believe undermines consumer trust and harms the entire industry. We remain committed to our position as both the Papaya and Voodoo matters continue through the litigation process. Regarding Papaya, our trial is now set for April 13, 2026, in the Southern District of New York, and we look very much forward to our day in court.

As a reminder, in connection with our 2024 settlement with AviaGame, our annual $7.5 million payment was received in Q1 of 2026. To date, a total of $65 million has been received from AviaGame. The company expects to receive two additional payments of $7.5 million in each of March 2027 and March 2028. In closing, 2025 was a meaningful year of progress across the enterprise. We stabilized the business, strengthened our platform infrastructure, improved operating discipline and preserved our balance sheet to support ongoing growth.

Additionally, we continue to deliver sequential and year-over-year revenue growth and expanded the technology foundation of both our Skillz and RZR platforms. By combining competitive skilled gaming with AI-driven performance marketing, we're 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.

With that, I'll turn over the call to Gaetano for a review of the financial results.

Thank you, Andrew. Our fourth quarter results highlight the benefits of disciplined execution and structural improvements across both the Skillz and RZR businesses, producing stronger fundamentals and a trajectory towards profitability. Q4 2025 GAAP revenue was $30 million, up from $27 million in Q3 2025 and up from $18 million in Q4 2024, representing 11% growth quarter-over-quarter and 67% growth year-over-year. Q4 2025 research and development expenses of $6 million increased 78% year-over-year, reflecting ongoing investment in our Skillz and RZR businesses. Q4 2025 sales and marketing expenses of $19 million increased 27% year-over-year, which reflected ongoing user acquisition and engagement marketing spend.

Q4 2025 general and administrative expenses of [ $18 ] million decreased 13% year-over-year, reflecting continued focus on expenses. Q4 2025 net loss of $18 million improved 27% year-over-year. Q4 adjusted EBITDA loss was $10 million, up from a loss of $12 million in Q3 2025 and up from a loss of $70 million in Q4 2024, which represented a 17% improvement quarter-over-quarter and 41% improvement year-over-year. Our balance sheet remains healthy, and we continue to manage capital prudently as we progress towards sustained profitability. We ended Q4 2025 with $195 million in cash and cash equivalents and $130 million of debt outstanding that is now classified as current. 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.

Operator, we're now ready to open the line for questions.

[Operator Instructions] First question is from the line of Ed Alter with Jefferies.

Would love to just dig into the Skillz side of the results and the paying MAUs and GMV. It looks like kind of the direction of growth from paying users versus GMV has kind of flipped versus the last couple of quarters where paying users were up a little bit and then GMV per payer was down a bit, and that kind of flipped in the fourth quarter. I would love to hear just your thoughts on kind of what changed here? And is this kind of the trajectory going forward? Or how to think about that?

Ed, thanks for the question. Yes. As you recall, in Q4, we had one of our larger gaming developers leave the platform. So we had a little bit of a dip in our paying MAU. But you can see that we continue to increase on our GMV per paying MAU. Going forward, as we restart -- as we continue to drive better efficiencies in our UA, we're going to rescale our UA spend and continue to grow also on our paying MAU.

Okay. Great. So -- and then, yes, I guess, on the partner that you guys kind of leaving the platform. I think you guys had disclosed that in your 10-K yesterday that they were 51% of revenue last year. How is the progress going in terms of kind of moving folks from those games into -- I think you talked about some Skillz branded versions of those -- of that content. Kind of I would love to hear the -- how that rollout has gone.

Yes. We don't disclose like the transition for a variety of reasons. But basically, when the partner left the platform, there were some games that left immediately. And then the two larger games that are, call it, the majority, call it, 80-plus percent are there, and we're in the process of transitioning to our owned games.

Also, if I could just jump in, this is Andrew, and thank you for the question, Ed. The other thing that we saw in Q4 is we had a technical issue with some of our engagement and marketing technologies for our player base, and we've now addressed that. So it's kind of -- you're seeing both effects in the change in [ PMAU ] in Q4.

There are no additional questions waiting at this time. So that will conclude the conference call. Thank you for your participation. You may now disconnect your lines.

Hello, everybody, and welcome to the Skillz Q3 2025 Earnings Conference Call. My name is [ Elliot ], and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to Joe Jaffoni. Please go ahead.

This morning, Skillz issued its 2025 third quarter earnings release, which is available on the company's Investor Relations website. The company is in the process of completing its unaudited interim financial statements and other disclosures for the third quarter ended September 30, 2025. Accordingly, we are announcing preliminary results for the third quarter, which are based on currently available information and are subject to revision.

Actual results may differ from these preliminary financial results and other financial information as final adjustments and developments may arise between now and the time the results are finalized. In the event the company determines it will not file its quarterly report on Form 10-Q by the prescribed deadline, it will file an extension on Form 12b-25 with the Securities and Exchange Commission, which may include further disclosure.

The company is also completing the financial statements and other disclosures for the annual report on Form 10-K for the year ended December 31, 2024, and its quarterly reports on Form 10-Q for the 3 months ended March 31, 2025, and the 3 months ended June 30, 2025. We were unable to file our annual report on Form 10-K for the year ended December 31, 2024, and we have previously announced we received a notice from the NYSE that the company was not in compliance with its listing standards.

The company is working diligently to complete the necessary work to file the Form 10-K as well as the quarterly reports on Form 10-Qs for the 3 months ended March 31, 2025, and the 3 and 6 months ended June 30, 2025, as soon as practical. The company expects to file the Form 10-K and Form 10-Qs by December 17, 2025, which is within the extension period provided to us by the New York Stock Exchange following our request for an additional extension period beyond the initial 6-month period granted by the notice.

Additionally, the company intends to take the necessary steps to achieve compliance with the applicable New York Stock Exchange listing standards as soon as possible. Before I turn the call over to Founder and Chief Executive Officer of Skillz, Andrew Paradise, please note that management's comments today may include forward-looking statements within the meaning of federal securities laws.

Forward-looking statements, which are usually identified by the use of words such as will, expect, should or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them.

We refer you to the company's Securities and Exchange Commission filings for a more detailed discussion of the risks that could impact future operating results and financial condition. During the call, management will discuss non-GAAP financial measures, which it believes can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with generally accepted accounting principles. The reconciliation of these measures to the most directly comparable GAAP measures is available in the company's third quarter 2025 earnings release.

With that, I'll turn the call over to Andrew for some opening remarks, followed by a review of the financial performance from the Chief Financial Officer of Skillz, Gaetano Franceschi, before we open the call for questions. Andrew?

Thank you, Joe, and good morning, everyone. I'll begin today's call with a review of the key Q3 quarterly results, which reflect the meaningful progress underway across Skillz and Aarki. Q3 GAAP revenue of $27 million grew 9% quarter-over-quarter, 11% year-over-year, supported by continued Aarki momentum and stability of the competition platform. Adjusted EBITDA loss of $12 million decreased 3% quarter-over-quarter and grew 15% year-over-year.

Paying MAU of 155,000 grew 6% quarter-over-quarter and 28% year-over-year, driven by higher [ payor ] conversion rates and deeper monetization. We delivered quarterly sequential growth in what's typically a softer seasonal period, marked by higher additional traffic costs and competition for consumer attention during the fall sports season.

Taking a look at our 4 business pillars, beginning with the first pillar, enhancing the platform for player and developer engagement. In the quarter, we launched an owned and operated title, Solitaire Skillz, which is showing early promise. The game serves as a testing ground for new features that we rolled out platform-wide.

Importantly, Solitaire Skillz was developed in conjunction with third-party developers and represents the first title to come to market through our $75 million Developer Accelerator Program. This program continues to attract strong developer interest with additional titles in development that are expected to be showcased at the Game Developer Conference in March 2026. Some of these upcoming games will incorporate new technology that we believe will further energize our developer community.

Switching to Aarki. The momentum from our ad tech business continued this quarter with accelerating revenue growth supported by new AI-driven product launches across the iOS and Android operating systems. Building on data models introduced last quarter, Aarki launched an iOS enabling privacy forward performance marketing. These new offerings are already driving measurable scale and efficiency, and we will continue to invest in Aarki's machine and deep learning capabilities to expand its addressable market and improve returns on spend for advertisers.

Regarding our second pillar, up-leveling our organization. Our gains in operational efficiency across both the competition platform and Aarki businesses continue to improve, allowing us to more effectively leverage our people and resources. We continue to strengthen our global team, particularly with the expansion of our new India office, where we're hosting today's call.

As it relates to our third pillar, go-to-market strategy and monetization, our focus remains on acquiring and retaining quality paying players while driving efficient monetization. Paying MAU improved again this quarter, reflecting stronger conversion amongst our existing player base, while total MAU declined modestly. This reflects our emphasis on engagement quality over volume. We continue to optimize customer acquisition costs and improve marketing efficiency supported by product level enhancements that strengthen monetization and retention. Together, these initiatives reinforce our go-to-market discipline, positioning the business for profitable scaling once we expand traffic more broadly.

For our fourth pillar, path to profitability, Aarki's business continues to expand its advertiser base and improve yield with net revenue up more than 100% year-over-year and improving margins. With improvements in the competition platform, together with the ad tech business momentum, we continue to make progress on our path to profitability.

Turning to an update on our fair play initiative. As discussed on previous calls, protecting players and preserving fair competition is core to our values. We continue to pursue litigation against Papaya and Voodoo games for their alleged use of bots, a practice we believe undermines consumer trust and harms the entire industry.

We remain firm in our position as both the Papaya and Voodoo matters move through the litigation process. On October 28, 2025, Judge Cote in the Southern District of New York denied Papaya's motion for summary judgment as to Skillz claims against Papaya. The court also denied Papaya's motion to exclude Skillz survey and damages experts. I encourage you to read Judge Cote's now public decision in detail. While other motions are still pending before the court, the court's confirmation that Skillz claims against Papaya will proceed to a trial is a major step forward in our fair play initiative.

Separately, I'd also like to address our dispute with Tether. As we disclosed in our 8-K filing, 2 of Tether's games, Solitaire Cube and 21 Blitz will remain on our platform for a period of up to 18 months following termination. During the post termination period, Skillz has the option but not the obligation to host paid competitions for these games on the company's platform.

In our view, the alleged bought fraud from our competitors not only affects our players, but also how our developer partners are able to monetize and generate revenue in our ecosystem. We appreciate the developers who stood by us and weathered the issues caused by companies in our view engaged with bot fraud.

With that being said, we remain committed to protecting the industry that we pioneered, and we anticipate our efforts to clean up the industry to be ultimately reflected in our financial performance. In closing, a key takeaway from today is that we're encouraged by the progress across both of our businesses. By combining our strengths in gaming and AI-driven ad tech, we're building a powerful foundation that can extend beyond gaming into adjacent verticals such as e-commerce, interactive entertainment and retail media, where performance marketing and content converge.

The combination of a scaled competitive gaming platform and an AI-powered advertising technology solution uniquely positions Skillz and Aarki to capture long-term growth opportunities, and in doing so, enhance value for our shareholders.

With that, I'll hand it over to our Chief Financial Officer, Gaetano Franceschi, for the financial review.

Thank you, Andrew. Our third quarter results demonstrate the benefits of disciplined execution and structural improvements across both Skillz and Aarki, producing stronger fundamentals and a clear trajectory toward profitability.

Q3 GAAP revenue was $27 million, up from $25 million in Q2 2025 and $24 million in Q3 2024, representing 9% growth quarter-over-quarter and 11% year-over-year. Q3 paying MAU was 155,000, up from 146,000 in Q2 2025 and 121,000 in Q3 2024, representing 6% growth quarter-over-quarter and 28% year-over-year.

On costs, R&D expenses of $5 million increased 15% year-over-year, reflecting ongoing investment in our competition platform and Aarki. Sales and marketing expenses of $17 million decreased 10% year-over-year, reflecting ongoing optimization of our user acquisition and engagement spend.

G&A expenses of $17 million decreased 4% year-over-year, reflecting continued focus on expenses. Q3 net loss of $17 million improved 17% year-over-year. Q3 adjusted EBITDA loss was $12 million, down from a loss of $11 million in Q2 2025 and up from a loss of $14 million in Q3 2024, representing a 3% decrease quarter-over-quarter and 15% increase year-over-year.

Our balance sheet remains healthy, and we continue to manage capital prudently as we progress toward sustained profitability. We ended Q3 with $213 million in cash, including $1 million of restricted cash and $129.7 million of total debt principal outstanding. With continued execution and operational focus, we expect Skillz to deliver meaningful long-term value for our shareholders as we execute with focus and discipline.

Operator, we're now ready to open the line for questions.

[Operator Instructions] Ladies and gentlemen, this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.

Good afternoon all. I'd like to welcome you all to the Skillz Inc. Second Quarter 2025 Results Call. My name is Elliott, and I'll be moderating your call today. [Operator Instructions] I'll now turn the conference call over to your host, Joe Jaffoni from JCIR to begin. Please go ahead.

This afternoon, Skillz issued its 2025 second quarter earnings release, which is available on the company's Investor Relations website. The company is in the process of completing its unaudited interim financial statements and other disclosures for the second quarter ended June 30, 2025. Accordingly, we are announcing preliminary results for the second quarter, which are based on currently available information and are subject to revision. Actual results may differ from these preliminary financial results and other financial information as final adjustments and developments may arise between now and the time the results are finalized. In the event the company determines it will not file its quarterly report on Form 10-Q by the prescribed deadline, it will file an extension on Form 12b-25 with the Securities and Exchange Commission, which may include further disclosure.

The company is also completing the financial statements and other disclosures for the year ended December 31, 2024. We were unable to file our annual report on Form 10-K for the year ended December 31, 2024, and we previously announced we received a notice from the NYSE that the company was not in compliance with its listing standards. The company is working diligently to complete the necessary work to file the Form 10-K as soon as practicable and currently expects to file the Form 10-K within the 6-month period granted by the NYSE notice. Additionally, the company intends to take the necessary steps to achieve compliance with the applicable NYSE listing standards as soon as practical.

Before I turn the call over to Skillz' Founder and CEO, Andrew Paradise, please note that management's comments today may include forward-looking statements within the meaning of federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, expect, should or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition.

During the call, management will discuss non-GAAP financial measures, which it believes can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. The reconciliation of these measures to the most directly comparable GAAP measures is available in the company's second quarter 2025 earnings release.

With that, I'll turn the call over to Andrew for some opening remarks, followed by a review of the financial performance from Skillz' CFO, Gaetano Franceschi, before we open the call for questions. Andrew?

Thank you, Joe, and good afternoon. I want to begin today's call by providing some key quarterly financial updates before turning to our fair play initiative and litigation updates. Q2 GAAP revenue was $27 million, up from $21 million in Q1 2025 and $25 million in Q2 2024. Excluding onetime adjustments, revenue grew 22% quarter-over-quarter and 4% year-over-year. Q2 paying MAU was 146,000, up from 124,000 in Q1 2025 and 122,000 in Q2 2024, which is 18% growth quarter-over-quarter and 20% growth year-over-year. Q2 adjusted EBITDA loss of $10 million, better than a loss of $16 million in Q1 2025 and a loss of $13 million in Q2 2024, which is an improvement of 36% quarter-over-quarter and 17% year-over-year. Taken together, these results reflect continued progress toward returning Skillz to consistent top line growth and positive adjusted EBITDA.

Moving now on to the first of our 4 pillars. During the quarter, we made significant progress in enhancing our platform to improve player and developer engagement retention. When we discuss this pillar, we consider both short- and long-term innovation across our platform. That means improving our player experience and enhancing developer features, while prioritizing projects that will support new content, which in the gaming industry can have a long time line from development to market readiness.

In the quarter, our product teams delivered several platform launches contributing to our quarterly sequential revenue growth. We enhanced our loyalty program in Q2, marking one of the most significant platform changes in several years. We recalibrated rewards to incentivize players to become high-value users without negatively impacting retention. The revamped program introduced secured milestones, personalized incentives and one of the largest monthly prize pools in mobile gaming. This initiative paired with improvements to our trophy system and live event experience are being well received by our players.

Additionally, we introduced ACH deposit and instant withdrawal, positioning Skillz as a leader in withdrawal times while providing players with funding optionality. Our previous average withdrawal time line was a known pain point for some players. We listen to player feedback and implement a solution that makes us one of the fastest and safest platforms to transact within our category.

We also launched the first version of our Skillz Arcade, a single app experience that allows players to seamlessly switch between more than a dozen games. Our goal is to build one of the largest single apps for prize-based competition with additional features to be layered in as we continue to improve the arcade experience. We previously discussed our long-term focus on new content pipeline generation, including a 3-year commitment of $75 million to support the Developer Accelerator program. This program aims to help defray costs for developers and encourage them to build their games for our platform as they work to create the next successful hit. Since announcing this in February, we've identified several opportunities to invest in a variety of genres.

While there's still a lot of work to be done, we're encouraged to see some of the early deliverables from our product road map benefiting the player and developer experience. With respect to up-leveling our organization, we continue to strengthen our global team. This includes key hires across our product, marketing, analytics and operations teams that contributed to this quarter's results.

For our third pillar, our go-to-market focus on user acquisition and monetization. This has been an area where we saw significant improvement with meaningful quarter-over-quarter growth in paying MAU. To highlight again, paying MAU or MAU for Q2 grew 18% versus Q1 with 146,000 PMAU, representing our highest level in 7 quarters. The improvement in PMAU is primarily driven by new platform launches and effective marketing to new and lapsed users. User acquisition spend in Q2 was lower than recent quarters, while we increased the volume of new paying users. We will continue to optimize customer acquisition costs while strategically scaling traffic. We believe our improved marketing efficiency and execution on our product road map will continue to benefit our monetization efforts, on our progress to demonstrate a clear path to profitability.

With the information just provided, we believe we are making the steady strides needed to achieve our goal of generating positive adjusted EBITDA. While we talked in detail about the sequential growth of the platform business, I'd also like to highlight that Aarki's revenue growth is also accelerating. This AI-powered ad tech business is continuing to innovate in the mobile marketing space, and we're pleased with the team's execution across their strategic initiatives.

In the quarter, Aarki delivered 2 key innovations. On iOS, it rolled out SKAN4 native privacy-centric models that drive both acquisition and retention without IDFA, identifier for advertiser, reliance. On Android, Aarki moved its top-of-funnel deep learning to graphics processing unit accelerated training on over 1 billion examples per day, enabling real-time bid optimization at scale. These advances expand Aarki's addressable market, sharpen ROAS for its customers and strengthen the integration with Skillz competition platform. With both businesses growing revenue, we're pleased with the progress in Q2.

Turning to an update on our fair play initiative. As we discussed on previous calls, protecting players and preserving fair competition is core to our values. We continue to pursue litigation against Papaya and Voodoo games for their alleged use of bots, a practice we believe undermines consumer trust and harms the entire industry. These 2 cases are ongoing in the Southern District of New York, and Papaya and Voodoo will have to answer to U.S. laws and U.S. consumers they have, in our opinion, defrauded. With respect to our Papaya litigation, the court recently issued a public order that Papaya must unseal, and I'll quote from the order, "One, its admission of its historical use of bots; and two, references to its executives' assertions of their rights against self-incrimination under the fifth amendment." We believe the elimination of bot fraud is critical to protecting players and restoring trust in this industry that we pioneered. As a leading U.S.-based platform for fair skill-based competition, we're confident that a level playing field, one that does not include the use of bots, will benefit players and shareholders.

I'll conclude my comments by reiterating our view that our current valuation gives no weight to the combined value of our operating platform and the progress we've made towards achieving our goals. As we continue to execute on our business strategy, we expect our unique platform to generate returns for our shareholders. And with that, I'll turn it over to Gaetano.

Thank you, Andrew, and good afternoon, everyone. Turning to the second quarter financial results, revenue was $27 million, up 30% sequentially and up 8% year-over-year. Excluding onetime adjustments, revenue grew 22% sequentially and 4% year-over-year. Paying MAU of 146,000 was up 18% sequentially and up 20% year-over-year. Our paid user conversion rate, which is paying MAU divided by MAU, was 19% in Q1, up from 15% a year ago.

Turning to costs and expenses. Research and development expenses were $5 million, up 13% year-over-year. Excluding stock-based compensation, R&D expenses were 17% of Q2 revenue. Sales and marketing expenses were $18 million, down 16% year-over-year. Excluding stock-based compensation, sales and marketing expenses were 62% of Q2 revenue. Q2 UA marketing was $3 million, while Q2 engagement marketing was $9 million. General and administrative expenses were $8 million. Excluding stock-based compensation and funds received as part of an insurance settlement in Q2, G&A expenses were 49% of Q2 revenue. Q2 net loss of $9 million compares to a net income of $26 million in the same quarter last year. Excluding an insurance recovery in Q2 and $46 million in Avia settlement in the prior year, Q2 net loss improved by $3 million year-over-year.

Adjusted EBITDA loss in the second quarter was $10 million, up 36% sequentially and up 17% year-over-year. Net cash used in operating activities for Q2 was $21 million. Excluding litigation settlements, insurance recovery and the semiannual debt payment, Q2 net cash used in operating activities was $8 million. We ended the second quarter with $239 million of cash, comprised of $229 million in cash and cash equivalents and $10 million in restricted cash. At the end of Q2, we had $129.7 million of total principal due on our outstanding debt. With our improving cash burn, we have the flexibility to deploy capital to enhance shareholder value. At this time, we'll turn the call back to the operator for the Q&A session.

[Operator Instructions] We have no questions at this time. So ladies and gentlemen, this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.