Firy (FIRY) Q2 2026 earnings call transcript

Good morning, everyone. Fury issued its 2026 second quarter earnings release yesterday after the market close, 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. Fury cautions that these forward-looking statements are subject to risk and uncertainties that may cause actual results different materially, from those reflected by the forward-looking statements made during the call. For additional details on these risks and uncertainties, please see Fury's annual report on Form 10K for the year end of December 31, 2025, as filed with the Securities and Exchange Commission and Fury's subsequent public filings with the SEC.

Fury undertakes no obligation to update or revise any forward-looking statements, whether as a result, new information, future events, or otherwise. Additionally, we will reference various non-GAP 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-GAP financial measures, reconciliations to their nearest GAP equivalents.

With that, it's now my pleasure to turn the call over to Fury CEO Andrew Paradise. Andrew, please go ahead.

Thank you, Richard. And good morning, everyone. Q2 was, without question, the most consequential period in the company's recent history. Our Fury rebrand is now fully in the market. The Bapaya verdict and judgment are in, and we're executing against our strategies to unlock value for our shareholders.

Let me start with a review of our second quarter results. I'll then highlight three significant developments since our last call in May before moving into our operating businesses. For the second quarter, GAP revenue was $31 million, up 6% quarter over quarter, and up 23% year over year. Adjusted EBITDA loss, excluding litigation-related expenses, was $2.7 million, a $4.5 million improvement quarter over quarter on a normalized basis, including litigation-related expenses. The adjusted EBITDA loss was $13.6 million, compared to a loss of $12.8 million in the first quarter, and $11.4 million in Q2 2025.

We also have an update regarding our balance sheet. As announced on August 4, we're redeeming $80 million in debt, saving the company approximately $2.8 million in interest expense before those notes maturity date. This leaves $50 million in debt outstanding, or evaluating options that would further strengthen our capital structure and liquidity position.

As part of our June rebrand to FERI and establishment of a holding company structure, we refine how we present our results. Beginning with the second quarter, corporate operating expenses are reported separately. This gives investors a cleaner view of our only. It has no effect on our consolidated financial results, and we have recast prior periods on the same basis. Looking at our two operating segments, razors exceeded $10 million in quarterly revenue for the first time, growing 6% quarter over quarter and 75% year over year. The second quarter was razors fourth consecutive quarter of profitability, with each quarter growing from the prior period.

We expect razors' profitability will continue to build through the back half of the year behind strong revenue momentum and operating leverage. For skills, revenue increased modestly quarter over quarter. This included a net $1.5 million benefit from two one-time items. Excluding these adjustments, skills revenue was down approximately 3% sequentially, consistent with the 8% decline in paying monthly active users.

Moving on to recent key developments. First, I'd like to introduce our new CFO, Alex Walsh, who joins us on the call today. Alex officially joined the team on July 13th, and they set the ground running. He brings an extensive track record of helping consumer-focused businesses accelerate top line growth while driving profitability. I'm confident he'll replicate the success and contributions he delivered as prior companies, aristocrat gaming, the Lego Group, and Procter & Gamble. Several of you have already had the chance to connect with him directly. As we transition from the turnaround into our growth phase, Alex will be front and center as we engage the Wall Street in this next chapter.

I also want to thank Gaitano Franceski, our former CFO, for the steady hand he provided throughout our turnaround and for the support he's shown in bringing Alex up to speed.

The second significant update is our rebrand in June to Fury. Fury is the parent company together with its two reportable operating segments, Razer and Skills. Razer is our high-growth AI-powered performance advertising business, helping brands acquire and retain high-value users. Skills is our real money, skill-based gaming operation, with more than 90 million registered users. And Beamable, which we acquired in the first quarter of this year is reported within our Skills business, is our developer, infrastructure technologies for the gaming industry with skills as a first customer and making progress on its objectives. The rebrand reflects the structure that's already existed for some time, interconnected businesses supported by shared corporate resources.

Each of our businesses shares a customer, the game developer, and serves this customer at different points in their monetization journey. And more importantly, our three businesses share something rare, a compounding flywheel that operates in a way few other businesses can replicate. The third update concerns the recent court ruling and our litigation against papaya gaming. As you'll recall, in April, the unanimous jury in the U. S. District Court for the Southern District of New York found papaya liable for false advertising. A few weeks ago, the presiding judge rejected all papaya's post trial challenges and awarded us approximately $730 million.

This was more than 70% above the original jury award and more than double the previous largest false advertising award in U. S. history. The natural question for shareholders is what happens next and specifically how we collect. Papaya is a private company, but public trial exhibits give the public access to their 2023 audited financials. Papaya earned $461 million in revenue and $73 million in net income and had $135 million in cash at the end of 2023.

In papaya's more recent filings with the Delaware Court, papaya CEO represented to the court that the company has achieved annual revenue of approximately $500 million per year, demonstrating the top line is on par with their 2023 financials. An appeal would go to the second circuit.

Federal appellate courts affirm the majority of the civil judge units they review on the merits. We remain confident in the record and the judgment while recognizing that no appellate outcome is guaranteed. We're pursuing every avenue available to us to return value to our shareholders. As papaya's largest creditor, we intend to assert our rights in both the Israeli and U. S. proceedings.

Looking back over the past few years to today at trial, the evidence showed that papaya advertised billions of dollars in prize pools while using bots and over 60% of prizes were never paid out. The jury found papaya liable and the court upheld those findings in full. Our team invented a category. Litigation is not our business. Building great products and services is.

We took on these cases to defend our business and the category we created. Papaya's now stayed as no longer running bots. As our core U. S. market returns to fair competition, we expect to benefit. Our mind are on where the rest of our fair play litigation stands and where it goes from here. In our litigation with ABA Games, the 2024 jury verdict translated into a $80 million settlement of which 15 million remains outstanding in two equal payments of $7.5 million over the next two years. Our case against Voodoo continues to move forward in the legal process.

And on a separate note, the trial date in our litigation with Tether Studios has been moved to 2027. Let's turn to our operating strategy. Razor is demonstrating strong performance through product-led growth. Today, the platform processes more than 6 million queries per second across more than 10 billion devices. Razor's growth is coming from two areas, increasing existing clients' share of wallet and winning new logos outright. Razor's customers are performance-based. If Razor provides an efficient return for its customers, it will capture higher share of wallet. Additionally, we're offering our customers new high-performing products. We offer five distinct products. Android retargeting and user acquisition, iOS retargeting and user acquisition, and connected television. We built global operations, product, and sales teams with significant experience in this category.

We see an opportunity to deepen existing customer relationships and to continue expanding beyond the core gaming market customer. Gaming remains Razor's largest advertiser category at approximately 70% of Q2 revenue. This is down from roughly 80% in the prior quarter, which we believe is a clear sign that diversifying into consumer apps, retail, and entertainment is working. We expect Razor's revenue growth to nearly double year over year. The business has a significant structural advantage worth highlighting. We own and operate our on-data servers. This enables Razor to run both retargeting and user acquisition at real scale. Our iOS products are still newer to the market and CTV just launched, so there's still a lot of untapped potential.

As all of our products scale, the incremental cost to serve stays low, which is exactly the kind of operating leverage you want to see. Shifting to skills. The business experienced operational headwinds during the quarter. I've stepped in on an interim basis to lead the skills business while we actively recruit a dedicated skills platform, CEO, to support our growth efforts.

We have lined a site to return the business to sequential growth in Q4. Our priorities for skills are aligned with long-term value creation, and we're committed to staying disciplined on costs and improving unit economics and customer lifetime value. Skills content is now a balance of owned and operated second-party and third-party titles. Games now operated and owned by skills account for 40% of Q2 GMV.

Before I hand things over to Alex, I want to point you to the new investor presentation we posted to our IIR website as part of the Junior Rebrand. It lays out, in more detail, how fury is positioned to benefit from combining AI-driven performance marketing with gaming. That combination underpins our expectation for revenue to more than double from 2025 to 2028, alongside a steady building cash generation. We expect to generate modest, positive operating cash flow in 2027 and accelerate from there into 2028 and beyond. We see four clear drivers for this business, and by extension, the shareholder value.

First, Razer continues to scale with expanding margins and increasingly stands out. Razer's already EBITDA positive and scaling across iOS user acquisition, retargeting, CTV, and a broadening advertiser base. Second, we're confident that we have the right playbook to drive a return to growth at skills. That path runs through our product, our content, and discipline unit economics.

Third, our operating structure gives us the ability to scale the overall business without a proportional increase in fixed costs. And fourth, we expect litigation expenses to decrease. While litigation has been a real expense burn to date, we believe it will deliver a stronger turn on investment. And as it decreases, it will drive EBITDA and cash flow growth. I started the call by saying Q2 was the most consequential period in the company's recent history. What makes it pivotal is what comes next. The papaya judgment is in hand.

The economics of the business are improving. We're entering a new phase for this portfolio. Fury gives us a structure designed to compound value across the businesses we own today, while creating optionality for where we go next. Over time, as we generate capital, we will allocate it to where we believe it can earn the highest returns. I founded this company in 2012 with 100-year vision. The last few years slowed that work, but they didn't change the thesis.

The business is improving. The structure is in place. And I believe this company's most interesting chapters are still ahead. With that, I'll turn the call over to our CFO Alex Walsh for a closer look at our second quarter results.

Thank you, Andrew. And good morning, everyone. I'm happy to be speaking with you. And I'm looking forward to working with you closely going forward. I just completed my first month at Fury, and with each day, my level of confidence increases in our ability to execute on our strategic initiatives that unlock shareholder value. Our second quarter results demonstrate the improvements we are making across the business.

Q226 gap revenue was $31 million, up from $29.1 million in Q1 of 26, and up from $25.2 million in Q2 of 25. Representing a 6% increase quarter over quarter, and a 23% increase year over year. Q226 research and development expenses of $6.9 million increased 42% year over year, reflecting the ongoing investment in our skills and brazors businesses. Q226 general and administrative expenses of $28.2 million increase 69% year over year. Q226 net loss of $24.5 million compared to $17.9 million in Q2 of 2025.

And finally, Q2 adjusted EBITDA loss was $13.6 million compared to a loss of $12.8 million in Q1 of 26, and a loss of $11.4 million in Q2 of 25. Excluding litigation-related expenses, adjusted EBITDA in Q226 improved to a loss of $2.7 million. Q2 litigation costs were elevated due to the papaya trial, and we expect them to decrease in future periods. Litigation costs are not realized in our financial statements until we collect them. We believe in our balance sheet and continue to manage capital prudently. We ended Q226 with approximately $164 million in cash and cash equivalents, and we ended Q2 with $130 million in debt that matures in December of this year.

As Andrew highlighted, we have already announced a notice of redemption for $80 million of our debt, which will leave approximately 50 million outstanding. We are an active dialogue on a range of alternatives to further strengthen our capital structure and liquidity position.

Importantly, we see significant still unrecognized value on our balance sheet that I want to highlight. As disclosed in our most recent form, 10K, we have federal net operating loss carry forwards of approximately $702 million in state net operating loss carry forwards of approximately $280 million. There remains $15 million to collect from the AVA game settlement, of which $7.5 million is expected to be collected in the spring of 27, followed by the final payment of $7.5 million in spring of 28. We own our building in Las Vegas, and we have a 10% interest in a private company exit games, for which we paid approximately $50 million in 2021.

In closing, we continue to move this business forward, fueled by meaningful we're now ready to open the line for questions.

Great. Thanks for the question. Good morning, everyone. Would love to just dive into the strategic shift and kind of the rebrand and get into why now, what in the market are you seeing that gives changing the branding now? Thanks for the question. So the rebrand is really to help investors better understand that skills has transitioned into several businesses over the last five years.

We acquired ARCHI in 2021. It's now been rebranded as Razer. Razer is a very meaningful portion of the total revenue and profitability of the business now, having crossed over 10 million in that revenue in the quarter. So the concept of is more than just a rebrand. It's really to help all of the investors listening and those who can't be here today to understand that we've moved from one business line skill-based gaming platform with skills to actually having multiple business lines with Razer being a significant portion of our revenue currently. We do see in the future that beamable will also become a meaningful portion of the consolidated revenue of the businesses.

The thematic way that these businesses tie together is they all share the same customer today, which is the game developer. And they all service the game developer in different portions of their monetization journey, whether with Razer 90 of the top 100 customers being game companies. So helping game companies acquire users into their games, skills providing unique skill-based gaming monetization, or beamable, which is a live-ox platform, which is the industry term for an engagement marketing platform for game companies.

So let's say here where you stand on that. Sure, that's a great question. So first part of the question, the customer base, those 90 of the top 100 customers being game companies, these are independent from skills for the vast majority of not all. And they range from studios, such as King, Niantic, which is now a part of Scopely and on from there. So major game businesses that engage in user acquisition and retargeting marketing.

When we look beyond this quarter, and we think about advertising in the games industry, without a doubt, we've seen new devices slow down over the last five years. When you have new device slow down, I think you can expect the market to seek equilibrium. I think we are going to see that though, over the next few years for where other products are moving into the advertising ecosystem on mobile, whether it's e-commerce, healthcare, AI is a major type of customer. But that equilibrium that's being achieved, it's not like mobile is going away as an advertising form. It's very much here to stay. It is a very important type of advertising when marketers think about the omnichannel world, their consumer or business target is living in and think about different ways to reach that target.

Yeah. Paying MAU trends, I think Alex perhaps that'd be a great question for you if you'd like to jump in.

Sure. Yeah. So on the spend itself with sales and marketing, it was 13.6 million, which was down from 17.3 million in quarter one. About one and a half million of that decline is lower end user incentives, which felt a 19 per paying monthly active from 21 and the balances and paid acquisition. So the reason we did not expand is a returns reason, not a cash reason. We were working through an operational issue during the quarter.

Acquiring users into a funnel you are actively repairing is how you buy a cohort that doesn't pay you back. So we chose to fix the funnel first. Note also that we did not cut spending across the board. We moved it R&D rose to 6.9 million from 5.1 million sequentially and it's up 42% year over year. That's funding the retention and engagement product work that will improve the payback on every dollar of UA that we spend later. As it relates to the second half, our line of sight is sequential growth in Q4, but that assumes product and content improvements.

And we may accelerate acquisition as contribution profits supports it. We're not going to recommit to a spend number on this call. And I think the sequencing matters here. So product first, then content, then spend.

Absolutely.

Thank you. That's a great question and something we are thinking very carefully about. Given the nature of the questions, I'll turn it over to Alex to talk more about how we're thinking about capital allocation.

Absolutely. Look, we have 50 million debt maturing December 15th. We will pay this debt off. And right now we're in active analysis, evaluating a range of alternatives that will strengthen our capital structure in our liquidity position. That may be refinancing. There are other options. We are also considering at this point in time. And when we have something to share, we will certainly share it. And I also had to ask the question about minimum cash to run the business. We would always like to have 30 million in cash as a buffer to whether operating dynamics, et cetera.

If I can also just jump in to add, we do have a considerable number of assets on our balance sheet that while the market doesn't seem to be able to appreciate the value of them, there is real world value to these assets that we currently have. Yeah.

That's a great point. And I talked about those in the open, but just to reiterate what we have, we still have 15 million of the AVA games settlement could be in. We own our business or own our office here in Vegas. We have nearly a billion dollars of net operating losses between federal and state. And then we also have that 10% stake and it's a preferred stake in a company called Exit Games.

So with the last two days, exit games position, given that you've been carrying it at cost largely, is there any part to monetization or market that you need to do or any thoughts on that or color on that would be helpful. So another great question. We're evaluating the exit games position carefully. I'll hand it off to Alex who's been closer to that workflow.

Yeah. So we see our interest in exit games as one of the several under appreciated value propositions on our balance sheet. I mentioned that we have a preferred stake in that business.

We will, to Andrew's point, actively assess how this fits in our portfolio and work with the founders of that company to determine what's in the best interest of both parties.

That's another great question. The current cash on the balance sheet, we think we have meaningful ways to invest it primarily.

I'm not sure, Alex, if you want to add any more color at this time about the cash on the balance sheet and how we beat deployment.

I don't think I have too much more to add to that, Andrew. We have, again, plenty of cash to run the business, to pay off the debt in December 15th, and we have a range of strategic alternatives again to strengthen our capital position and our liquidity.

I would perhaps add that we do have a very meaningful value event that we haven't talked about as an asset, which is the litigation that we recently won against papaya gaming, and that's obviously a major moving part for our business right now in determining capital allocation.

Yeah, we're pretty bullish on the business, both on razor and its continued progress, as well as skills. I'm sure Alex has some thoughts that he can give you a little more specifics on guiding revenue assumptions through the end of the year.

Yeah, absolutely. So we mentioned on the skills platform, let's just start with that. We mentioned some operational issues in Q2 that were headwinds. Those will be slight headwinds into Q3, but we have line of sight to sequential growth in Q4 on the skills platform.

But let's shift gears to razor. So we mentioned that razor exceeded 10 million of quarterly revenue for the first time in Q2. That was strong 75% year-over-year growth. It also delivered its fourth consecutive quarter of profitability, and each quarter is since grown sequentially.

Just last year, relative to 24, razor grew from 11 million to 27 million of net revenue, so nearly tripling, enabled by the launch of iOS UA and 168% net retention.

As we look into 26 and beyond, so iOS is still early, CTV is not yet scaled, and the infrastructure is built, so the revenue growth comes with minimal cost increases, or set differently strong operating leverage in this business. We have very bullish expectations for razor, and for the full year in 26, we expect the revenue to nearly double year-over-year.

If I could also add, we're really excited about the launch range.

Apologies if I cut out there. Hi there, Andrew. We can hear you. We are happy to continue. Thank you for your patience, everyone. I believe we cut out when I was speaking about being really excited about razor's growth in CTV, and what we've seen so far in early results. One of the things that's particularly exciting is the partnership that we have with LG for being an exclusive gaming advertiser. When you think about the omni-channel capability for a razor between CTV and device, we see a really bright future for CTV in 2027.

Thank you.