Firy Inc.

08/19/2026 | Press release | Distributed by Public on 08/19/2026 14:11

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the results of operations and financial condition of Firy Inc. (for purposes of this section, "Firy," "we," "us" and "our"). MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"), and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).
This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), about Firy and our industry that involve numerous risks and uncertainties, including, but not limited to, those described in Part I, Item 1A, "Risk Factors" in our Annual Report and Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans, user growth and engagement, product initiatives, ability to collect legal judgments issued in our favor, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "going to," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," or "would" or the negative of these words or other similar terms or expressions. We caution you that the foregoing may not include all of the forward-looking statements made.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. Actual results may differ materially from those contained in any forward-looking statements. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. The inclusion of forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Forward-looking statements made speak only as of the date on which such statements are made, and we undertake no obligation to update them in light of new information or future events, except as required by law.
Overview
Firy Inc. (the "Company," "Firy," "we," "us," or "our") is a global holding company and the parent of our operating businesses, including Skillz and RZR. Firy is built to fuel business potential and operates at the intersection of content, identity, commerce and performance marketing. The Company leverages first-party data, enterprise-scale infrastructure and scalable operating systems, with a disciplined focus on capital efficiency and long-term value creation.
Skillz operates a proprietary, online-hosted, multi-player platform that enables players worldwide to compete in games ("Competitions"). The platform hosts both games developed by third-party developers and games that Skillz itself owns and operates. Skillz provides third-party developers with a software development kit ("SDK") that they download and integrate with their existing games. The SDK serves as a data interface between Skillz, developers and players that enables Skillz to provide monetization services, including end-user registration services, player matching, fraud and fair play monitoring, and billing and settlement services. In addition to enabling third-party developers, Skillz develops, publishes, and operates its own first-party games on the platform, which represents a meaningful portion of platform activity.
In March 2026, the Company's Aarki business rebranded as RZR. The rebrand reflects expanded capabilities and market positioning; there was no change to the entity's legal structure or control. RZR is an artificial-intelligence-powered demand-side platform that provides data-driven user acquisition, retargeting, and advertising optimization services across mobile and other digital channels. RZR applies proprietary machine learning models to improve advertising performance for its customers.
As Skillz onboards new developers, RZR's platform is designed to power game title growth through user acquisition and monetization, continuously enhancing its machine learning engine, which in turn delivers better outcomes for developers and greater efficiency for the Skillz platform.
Trends and Developments Impacting our Business
Trends
Engagement marketing is a sales and marketing expense representing rewards and awards that developers do not have a valid expectation of being offered to end-users to engage on our platform. Engagement marketing may be impacted by end-user incentives, which include Bonus Cash that can only be used to enter into paid contests.
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User acquisition ("UA") marketing is a sales and marketing expense to acquire new paying users to our platform. UA marketing spend for the six months ended June 30, 2026 was approximately $4.4 million, as compared to approximately $8.1 million in the six months ended June 30, 2025. We are currently unable to reasonably estimate the quantitative impact, or range of impact, that changes in UA marketing will have on forward-looking revenue as a result of a number of interrelated factors impacting revenue, including, but not limited to, retention of existing users on the platform, average revenue per paying monthly active user, efficacy of various marketing programs on existing users, elasticity of the digital advertising supply curve, and impact of varying levels of player liquidity on the existing user ecosystem.
Developments
Tether Litigation
As previously disclosed, on August 29, 2025, we received a Notice from Tether indicating that Tether is terminating all of its various agreements with us, including our terms of service, effective as of September 1, 2025. Tether's Notice provides that Tether is terminating the Tether Agreements for convenience, while also asserting grounds for termination for cause (effective September 28, 2025) in the event its termination for convenience is not held as effective by a competent tribunal. We believe the termination notice to be invalid and in breach of Tether's obligations under the Tether Agreements.
Certain of the Tether Agreements restrict the removal of Tether's top two games, Solitaire Cube and 21 Blitz, from the Company's platform for at least 18 months following termination. During the post-termination period, Skillz has the option, but not the obligation, to host paid competitions for such games on the platform. If we are unable to negotiate new terms with Tether or, as applicable with other developers, or if any new terms are less favorable to us, or if our litigation against Tether is unsuccessful, and these games were to be removed from our platform and we are unable to identify and market suitable replacements, there may be a material adverse effect on our business and results of operations.
Following receipt of the Notice, on September 1, 2025, we filed suit in the Court of Chancery of the State of Delaware, seeking injunctive and declaratory relief in relation to Tether's breach of the Tether Agreements. The Company is also disputing Tether's allegations with respect to the grounds for termination of the Tether Agreements for cause. We intend to defend our position, but can provide no assurances regarding the outcome of the claim and the impact it may have on our business. The removal of Solitaire Cube and 21 Blitz contrary to the terms set forth in the agreements and/or before Skillz can provide a suitable replacement to such games may cause a material adverse effect on our platform business and results of operations.
Papaya Litigation
On April 23, 2026, a jury in the U.S. District Court for the Southern District of New York found Papaya Gaming Ltd. and Papaya Gaming Inc. (together, "Papaya") liable for false advertising and returned awards of $420 million in actual damages, $719 million in profits-based disgorgement, and $652 million in advisory cost-savings disgorgement, with the court to determine which recovery theory will apply. Post-trial motions, oppositions, and replies were filed by the court's June 19, 2026 deadline. The court issued an opinion and order awarding $719 million in disgorgement of unjust profits, plus approximately $10.1 million in fees and costs to Skillz on July 27, 2026. A final judgment in the matter was entered on July 31, 2026. The Company intends to vigorously pursue full collection of the judgment; however, no assurance can be given as to the timing or amount of any ultimate recovery, including in light of any appeal or further proceedings. Refer to Note 8, "Commitments and Contingencies" for further discussion.
Items Impacting Comparability of Results of Operations and Financial Condition
Our condensed consolidated financial statements included in this report reflect the following additional items impacting the comparability of results of operations and financial condition:
•In March 2025, the Company and a vendor settled a dispute. In exchange for mutual releases of all claims, the Company paid the vendor $2.8 million.
•In April 2025, the Company and a lessor of its former headquarters in San Francisco mutually agreed to terminate a lease. In exchange for mutual releases, the Company paid the lessor a lump sum payment of $14.0 million.
•In June 2025, the Company and a vendor settled a dispute. The Company paid the vendor $0.5 million, which represented the past due balances for year one and year two of the agreement.
•In April 2026, the Company completed an asset acquisition of a game tile for total consideration of $0.7 million, of which $0.4 million is payable within 12 months of the acquisition date.
•In May 2026, the Company completed an asset acquisition of a game tile for total consideration of $2.2 million, of which $0.2 million is payable within 12 months of the acquisition date.
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Operating Segments
We have two reportable business segments: Skillz and RZR. Refer to Note 12, "Segment Reporting", of the notes to the condensed consolidated financial statements included in this Form 10-Q for further discussion.
Skillz
Our platform enables game developers to monetize their content through multi-player competition by integrating real-money tournaments, virtual prizes, and social competition features directly into their games. The platform provides a managed backend that supports key competitive functionality, including player matching, leaderboards, anti-cheat integrity systems, and payment processing. Our scalable multi-player platform allows for real-world prizes that go beyond one-off competitive implementations and provides for a repeatable, developer-accessible system. In exchange for access to our multi-player platform and monetization services, Skillz and its developers share in the aggregate entry fees paid by end users. Our platform capability highlights include:
•Monetize Through Competitions: Developers may earn revenue by hosting skill-based competitions where players pay entry fees, and Skillz takes a percentage of the pool.
•Player Matching: Automatically match players based on skill levels, ensuring fair and engaging gameplay experiences.
•Cross-Platform Support: The Skillz platform is compatible with Android, iOS, and some Unity-based games, allowing developers to reach a broad audience.
•Comprehensive Analytics: Developers have access to performance metrics, player insights, and revenue data through the Skillz dashboard.
•Focus on Game Development: With Skillz managing tournaments, payments, and player matching, developers can focus on building their games' core mechanics and experiences.
In addition to using its platform to partner with game developers, Skillz publishes select game titles, which are shared with the broader ecosystem.
RZR (formerly Aarki)
RZR is a performance marketing platform that enables advertisers to acquire, retain, and monetize users across mobile, connected television (CTV), and other digital channels. The platform utilizes proprietary machine learning and neural network-based architecture to optimize campaigns across user acquisition, retargeting, and brand performance objectives within a unified system.
The platform processes large-scale data inputs in real time and applies predictive models to optimize bidding, targeting, and campaign performance across channels.
While historically focused on mobile gaming, RZR now serves a broader set of industries, including consumer applications, retail, food and beverage, and entertainment.
At the center of this long-term vision is RZR's strategic relationship with our Skillz platform. Together, we believe our Skillz platform and RZR form an ecosystem in which content creation, audience, and performance continuously reinforce one another. For our developers, RZR enables monetization through user acquisition and re-targeting, and the more Skillz SDK-enabled developers use RZR, the better RZR's machine learning engine becomes, which we believe drives improved outcomes for the developers and more spend on the RZR platform.
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Results of Operations
Comparison for the three months ended June 30, 2026 and 2025:
Three Months Ended June 30,
2026 to 2025 Change
2026 2025 Increase/(Decrease)
Amount Percentage
Revenue $ 30,992 $ 25,214 $ 5,778 23 %
Costs and expenses:
Cost of revenue 3,911 3,220 691 21 %
Research and development 6,888 4,840 2,048 42 %
Sales and marketing 13,592 16,431 (2,839) (17) %
General and administrative 28,168 16,706 11,462 69 %
Total costs and expenses 52,559 41,197 11,362 28 %
Loss from operations (21,567) (15,983) (5,584) (35) %
Interest expense, net of interest income (2,424) (1,321) (1,103) (83) %
Other (expense) income, net (388) (637) 249 39 %
Loss before income taxes (24,379) (17,941) (6,438) (36) %
Provision for (benefit from) income taxes 96 (19) 115 605 %
Net loss $ (24,475) $ (17,922) $ (6,553) (37) %
Revenue
Total revenue increased by $5.8 million, or 23%, to $31.0 million for the three months ended June 30, 2026 from $25.2 million for the same period in the prior year. This was primarily due to higher revenue from our RZR segment, together with additional revenue from our Skillz segment.
RZR revenue increased by $4.4 million, or 75%, to $10.3 million for the three months ended June 30, 2026 from $5.9 million for the same period in the prior year. This was primarily due to higher advertising revenue from greater demand.
Skillz revenue increased by $1.4 million, or 7%, to $20.8 million for the three months ended June 30, 2026 from $19.4 million for the same period in the prior year. This was primarily due to higher average entry fees and a $3.7 million benefit recognized to reduce our indirect taxes liabilities, partially offset by reduced tournament play and higher end-user incentives.
Costs and Expenses
Cost of revenue increased by $0.7 million, or 21%, to $3.9 million for the three months ended June 30, 2026 from $3.2 million for the same period in the prior year. This was primarily due to higher software license, server and payment processing costs from our Skillz and RZR segments.
Research and development costs increased by $2.0 million, or 42%, to $6.9 million for the three months ended June 30, 2026 from $4.8 million for the same period in the prior year. This was primarily due to higher employee-related costs from our Skillz and RZR segments.
Sales and marketing costs decreased by $2.8 million, or 17%, to $13.6 million for the three months ended June 30, 2026 from $16.4 million for the same period in the prior year. This was primarily due to lower user acquisition marketing expenses and engagement marketing expenses from our Skillz segment, partially offset by higher employee-related costs from our Skillz and RZR segments.
General and administrative costs increased by $11.5 million, or 69%, to $28.2 million for the three months ended June 30, 2026 from $16.7 million for the same period in the prior year. This was primarily due to higher corporate legal fees in addition to higher corporate employee-related costs and employee-related costs from our RZR segment.
Interest expense, net of interest income increased by $1.1 million, or 83%, to $2.4 million for the three months ended June 30, 2026 from $1.3 million for the same period in the prior year. This was primarily related to lower interest income earned as the Company held fewer interest-bearing investments.
The provision for income taxes was $0.1 million for the three months ended June 30, 2026, representing a 605% increase when compared to the benefit from income taxes for the three months ended June 30, 2025. This was primarily due to a book loss, state and foreign taxes and equity award activities, mostly offset by a full valuation allowance on our deferred tax assets.
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Results of Operations
Comparison for the six months ended June 30, 2026 and 2025:
Six Months Ended June 30,
2026 to 2025 Change
2026 2025 Increase/(Decrease)
Amount Percentage
Revenue $ 60,097 $ 47,111 $ 12,986 28 %
Costs and expenses:
Cost of revenue 7,508 6,184 1,324 21 %
Research and development 11,951 9,658 2,293 24 %
Sales and marketing 30,875 34,436 (3,561) (10) %
General and administrative 47,580 35,789 11,791 33 %
Gain from litigation settlement (7,500) (7,500) - - %
Total costs and expenses 90,414 78,567 11,847 15 %
Loss from operations (30,317) (31,456) 1,139 4 %
Interest expense, net of interest income (4,704) (2,392) (2,312) (97) %
Other (expense) income, net (229) (1,196) 967 81 %
Loss before income taxes (35,250) (35,044) (206) (1) %
Provision for income taxes 170 20 150 750 %
Net loss $ (35,420) $ (35,064) $ (356) (1) %
Revenue
Total revenue increased by $13.0 million, or 28%, to $60.1 million for the six months ended June 30, 2026 from $47.1 million for the same period in the prior year. This was primarily due to higher revenue from our RZR segment, together with additional revenue from our Skillz segment.
RZR revenue increased by $9.8 million, or 94%, to $20.1 million for the six months ended June 30, 2026 from $10.4 million for the same period in the prior year. This was primarily due to higher advertising revenue from greater demand.
Skillz revenue increased by $3.4 million, or 9%, to $40.4 million for the six months ended June 30, 2026 from $37.0 million for the same period in the prior year. This was primarily due to higher average entry fees and reduced end-user incentives in addition to a $3.7 million benefit recognized to reduce our indirect taxes liabilities, partially offset by reduced tournament play.
Costs and Expenses
Cost of revenue increased by $1.3 million, or 21%, to $7.5 million for the six months ended June 30, 2026 from $6.2 million for the same period in the prior year. This was primarily due to higher software license, server and payment processing costs from our Skillz and RZR segments.
Research and development costs increased by $2.3 million, or 24%, to $12.0 million for the six months ended June 30, 2026 from $9.7 million for the same period in the prior year. This was primarily due to higher employee-related costs from our Skillz and RZR segments.
Sales and marketing costs decreased by $3.6 million, or 10%, to $30.9 million for the six months ended June 30, 2026 from $34.4 million for the same period in the prior year. This was primarily due to lower engagement and user acquisition marketing expenses from our Skillz segment, partially offset by higher employee-related costs from our Skillz and RZR segments.
General and administrative costs increased by $11.8 million, or 33%, to $47.6 million for the six months ended June 30, 2026 from $35.8 million for the same period in the prior year. This was primarily due to higher corporate legal fees in addition to higher corporate employee-related costs and employee-related costs from our RZR segment.
Interest expense, net of interest income increased by $2.3 million, or 97%, to $4.7 million for the six months ended June 30, 2026 from $2.4 million for the same period in the prior year. This was primarily related to lower interest income earned as the Company held fewer interest-bearing investments.
The provision for income taxes was $0.2 million for the six months ended June 30, 2026, representing a 750% increase when compared to the provision for income taxes for the six months ended June 30, 2025. This was primarily due to a book loss, state and foreign taxes and equity award activities, mostly offset by a full valuation allowance on our deferred tax assets.
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Liquidity and Capital Resources
As of June 30, 2026, our principal sources of liquidity are our cash and cash equivalents in the amount of $164.0 million, which are primarily invested in money market funds with maturities of less than three months.
In December 2021, the Company offered and sold $300.0 million in aggregate principal senior secured notes due 2026 in a private placement to qualified institutional buyers. Annual interest started to accrue from December 20, 2021 at a stated rate of 10.25% and is payable semiannually on June 15 and December 15 of each year, beginning on June 15, 2022. The notes will mature on December 15, 2026. We used the net proceeds from the offering for general corporate purposes. The notes contain customary covenants restricting our and certain of our subsidiaries' ability to incur debt, incur liens, make distributions to holders of our stock, make certain transactions with our affiliates, as well as certain financial covenants specified in the indentures. After giving effect to open market repurchases of our senior secured notes, $129.7 million of the senior secured notes remained outstanding as of June 30, 2026. We were in compliance with all covenants applicable to our secured notes as of June 30, 2026. On August 4, 2026, we delivered a notice of partial redemption to redeem $80.0 million in aggregate principal amount of the senior secured notes at a redemption price of 100.00% of the principal amount of the notes, plus accrued and unpaid interest, with such redemption occurring on August 14, 2026. On August 14, 2026, the Company redeemed $80.0 million in aggregate principal amount of the Company's outstanding 2021 Senior Secured Notes at a redemption price of 100.00% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest. As of August 14, 2026, after consummation of that redemption, there was $49.7 million aggregate principal amount of the Senior Secured Notes outstanding.
We believe our existing sources of liquidity are sufficient to fund our operating activities on a short- and long-term basis. Our future cash requirements will depend on many factors, including revenue growth and additional sales and marketing spending activities in addition to funds needed to invest in or acquire complementary businesses, applications or technologies. However, we cannot assure you that cash provided by operating activities or cash and cash equivalents will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may contain significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain additional financing on favorable terms or at all.
The following table provides a summary of cash flow data:
Six Months Ended June 30,
2026 2025
Fav/(Unfav) $ Var
Net cash used in operating activities $ (24,652) $ (31,741) $ 7,089
Net cash used in investing activities $ (4,212) $ (3,428) $ (784)
Net cash used in financing activities $ (2,260) $ (8,097) $ 5,837
Net Cash Used In Operating Activities
Our cash flows from operating activities are significantly affected by the growth of our businesses primarily related to research and development, sales and marketing, and general and administrative activities. Our operating cash flows are also affected by working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities.
Net cash used in operating activities decreased by $7.1 million to $24.7 million for the six months ended June 30, 2026 from $31.7 million for the same period in the prior year. This was primarily due to changes in operating assets and liabilities related to cash receipts and disbursements in the normal course of business from our Skillz and RZR segments for the six months ended June 30, 2026.
Net Cash Used In Investing Activities
Net cash used in investing activities increased by $0.8 million to $4.2 million for the six months ended June 30, 2026 from $3.4 million for the same period in the prior year. This was primarily due to $2.2 million of asset acquisitions from our Skillz segment, partially offset by reduced equipment purchases from our Skillz and RZR segments.
Net Cash Used In Financing Activities
Net cash used in financing activities decreased by $5.8 million to $2.3 million for the six months ended June 30, 2026 from $8.1 million for the same period in the prior year. This was primarily due to $7.7 million of share repurchase activities that occurred during the prior year period, partially offset by $2.3 million of restricted stock vestings that occurred during the current year period.
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Contractual Obligations and Commitments
Our material cash requirements include the following contractual and other obligations.
Leases
We have operating lease arrangements for office space. As of June 30, 2026, we had lease payment obligations of $5.2 million, of which $1.3 million is payable within 12 months.
Long-Term Debt
The Company's long-term debt consists of the 2021 Senior Secured Notes. As of June 30, 2026, the total principal amount of $129.7 million, gross of discount and issuance costs of $1.0 million, is due on December 15, 2026. On August 4, 2026, we delivered a notice of partial redemption to redeem $80.0 million in aggregate principal amount of the 2021 Senior Secured Notes at a redemption price of 100.00% of the principal amount of the 2021 Senior Secured Notes, plus accrued and unpaid interest, with such redemption occurring on August 14, 2026. On August 14, 2026, the Company redeemed $80.0 million in aggregate principal amount of the Company's outstanding 2021 Senior Secured Notes at a redemption price of 100.00% of the principal amount of the Senior Secured Notes, plus accrued and unpaid interest. As of August 14, 2026, after consummation of that redemption, there was $49.7 million aggregate principal amount of the Senior Secured Notes outstanding.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
There have been no material changes from the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
See Note 2, "Summary of Significant Accounting Policies", to our condensed consolidated financial statements for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one, of their potential impact on our financial condition and our results of operations.
Firy Inc. published this content on August 19, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 19, 2026 at 20:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]