Skillz Inc.
For the period ended Dec 31, 2024. Filed Nov 6, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Nov 6, 2025
FIRY$11.48+6.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-08-29.
0001801661-24-000100
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-11-06.
0001801661-25-000050
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
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Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (46)
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December 31, 2024 compared to the year ended December 31, 2023. For a discussion of the year ended December 31, 2023
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compared to the year ended December 31, 2022, please refer to Part II, Item 7, “Management’s Discussion and Analysis of
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Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
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Trends and Developments Impacting our Business
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Trends
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Developments
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Tether Litigation
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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 or services, 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.
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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. For the year ended December 31, 2024, Tether accounted for 45% of our revenue. 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
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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. See the risk factor entitled “Historically, a limited number of games have accounted for a substantial portion of our revenue. If these games were to become less popular or be removed from our platform and we are unable to identify and market suitable replacements, our business and prospects could suffer” in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K for additional information on risks related to Tether’s Notice. 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
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Extension for Continued Listing on the New York Stock Exchange
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On April 2, 2025, we received a notice from the NYSE indicating that we are not in compliance with the NYSE’s continued listing requirements under the timely filing criteria outlined in Section 802.01E of the NYSE Listed Company Manual as a result of our failure to timely file this Annual Report on Form 10-K. The NYSE informed us that, under the NYSE’s rules, we had six months to file this Annual Report on Form 10-K with the U.S. Securities and Exchange Commission (the “SEC”) and that the NYSE will continue to list our shares on the NYSE provided that we regain compliance with Section 802.01E within the initial six-month cure period.
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We presented a compliance plan to the NYSE in September 2025 to request an additional extension period for continued listing of our Class A common stock on the NYSE (the “Additional Cure Period”) in order for us to complete and file this Annual Report on Form 10-K, and our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2025 and June 30, 2025, and any subsequent delinquent SEC quarterly filings (the Quarterly Reports on Form 10-Q together with this Annual Report on Form 10-K, collectively, the “Delayed Filings”), and regain compliance with the NYSE’s continued listing requirements.
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On September 25, 2025, the NYSE granted our request for an Additional Cure Period and agreed to provide us with an extension to continue our listing on the NYSE through December 17, 2025, subject to ongoing reassessment by the NYSE and provided that we become current with our SEC filings by such date.
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Papaya Litigation
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On October 28, 2025, the court denied Papaya’s motion for summary judgment as to Skillz’s claims against Papaya. The Court also denied Papaya’s motion to exclude Skillz’s consumer and damages experts. The court’s rulings on Skillz’ motion for summary judgment as to Papaya’s counterclaims against Skillz, and Papaya’s experts are still pending(see Note 10, Commitments and Contingencies).
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Items Impacting Comparability of Results of Operations and Financial Condition
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Our Financial Statements included in this report reflect the following additional items impacting the comparability of results of operations and financial condition during the fiscal year 2024:
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•In connection with a dispute with a former employee, the Court of Appeals issued its decision, affirming the judgment of $4.4 million, with an additional $2.3 million for a total award of $6.7 million. The Court of Appeals also affirmed the dismissal of the wrongful termination and retaliation claims, holding that stock options are not wages. The Court of Appeal’s decision became final, non-appealable and enforceable.
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•A vendor and the Company settled a dispute. In exchange for mutual releases of all claims, the Company paid the vendor $2.75 million in March 2025, $2.75 million of which has been accrued for in fiscal year 2024, (see Note 19, Subsequent Events).
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•A vendor and the Company agreed to mediate a dispute that resulted in a settlement where the Company agreed to pay the vendor $533 thousand, which represented the past due balances for year one and year two of the agreement that were fully accrued as of December 31, 2024 (see Note 19, Subsequent Events).
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•The Company and a lessor of its former headquarters in San Francisco mutually agreed to terminate a lease. In exchange for the mutual releases, the Company paid the lessor a lump sum payment of $14,000,000 in fiscal year 2025. The loss on termination of the operating lease of $0.4 million represented the difference between the settlement amount and the carrying value of the lease obligation and was recorded during the fiscal year 2024.
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•A federal jury in San Jose, California issued a verdict in favor of Skillz in a patent infringement action Skillz brought against a privately-held mobile gaming company, AviaGames (“Patent Case”). Skillz, Big Run, and AviaGames entered into a settlement agreement with respect to both the Patent Case and Unfair Competition Case pending against AviaGames (the “Litigation Settlement”). In exchange for dismissal of both actions and other settlement terms, AviaGames agreed to pay Skillz and Big Run a total of $80.0 million. The Company and Big Run Studio entered into a Side Letter Agreement providing that a portion of the AviaGames settlement funds allocated to Big Run Studio be utilized to repay the outstanding principal and accrued interest under the Loan and Security Agreement totaling $2.0 million (see Note 5, Balance Sheet Components). The Company and Big Run collectively received $50.0 million from AviaGames pursuant to the settlement agreement. Of the $50.0 million received, Skillz received $48.0 million, $2.0 million of which was for settlement of the amount outstanding under the Loan and Security Agreement with Big Run. Beginning in March of 2025, AviaGames is required to pay Skillz an additional $7.5 million annually over a four-year period as royalty payments for AviaGames’ license of the applicable patent and its patent family; no portion of these payments are due to Big Run (see Note 5, Balance Sheet Components and Note 10, Commitments and Contingencies). During the year ended December 31, 2024, the Company recorded a gain from the Litigation Settlement netting $46.0 million consisting of the gross payment of $48.0 million less the $2.0 million received for satisfaction and settlement of the Loan and Security Agreement. The Company will record the $7.5 million payments to be received in March 2025, 2026, 2027 and 2028 as a gain upon receipt of each payment.
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•In connection with the Company’s De-SPAC litigation, Skillz filed suit against its insurance carrier for D&O insurance coverage and on January 17, 2025, the insurance carrier agreed to contribute a total of $9,750,000 to the Company in connection with this matter’s settlement agreement. The parties involved with the De-SPAC litigation executed a term sheet to settle the action in principle for $10 million, subject to completing settlement documentation and obtaining court approval. As the successor to Flying Eagle, the defendant in the De-SPAC litigation, Skillz is obligated to indemnify and pay legal costs of the Individual D&O Defendants of Flying Eagle in their capacities as such in connection with this action and, as such recorded an expense of $10 million, offset by the insurance proceeds of $9.75 million, which is reflected in general and administrative expenses for the year ended December 31, 2024. The
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Company recorded the insurance recovery proceeds as an offset to general and administrative expenses for the year ended December 31, 2024 (see Note 19, Subsequent Events).
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We generate revenue from our two reportable operating segments, Skillz and Aarki.
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Skillz Revenue
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Aarki Revenue
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Thru its Aarki segment, the Company offers a technology platform (i.e. demand side platform, “DSP”) to source available advertising space from its network of vendors and suppliers, which uses a real-time auction process. The revenue from advertising is recognized over time based on the number of impressions as the performance obligation is satisfied. The Company considers itself the agent of its customer(s). This is due to the Company’s involvement in programmatically placing and sourcing advertisements on behalf of customers via a network of third party publishers. The Company does not, at any time, take ownership of advertising inventory being sourced and placed. Via the DSP, if the Company wins the auction and an impression is served, the customer’s advertisement is displayed on the publisher or supplier’s mobile application.
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Management evaluates whether the performance obligation contained in its insertion order (“IO”) is distinct within the context of a customer contract as defined above. We have determined that the nature of our performance obligations to customers is to run their programmatic media campaigns by delivering advertisements to their target audience(s). This is carried out based on parameters and strategies outlined by the customer. This performance obligation to the customer incorporates the following:
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•The DSP and related services (i.e., development of campaign strategy, provision of creative services, campaign flighting, performance monitoring and serving of the ads); and
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•Sourcing mobile advertising space from the Company’s network of vendors / suppliers.
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None of these promises are separately identifiable from each other in the contract, as they are integrated with the DSP to provide the customer a combined output. The output empowers the customer to acquire the most valuable space for their mobile advertising campaign based on a pre-established or maximum budget in the IO. Our customers do not dictate where or how the Company sources advertising space. Likewise, the Company does not take ownership of any inventory before the mobile advertisement is served to the customer.
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Gain on Legal Settlement
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During 2024, we received proceeds under the terms of a settlement agreement entered into with AviaGames in connection with certain bot misuse litigation. The recorded gain on legal settlement was $46 million in 2024. Refer to Note 10, Commitments and Contingencies, of the notes to the consolidated financial statements for further discussion.
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Interest Income (Expense), Net
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Interest income, net was $0.3 million in 2024 as compared to interest expense, net of $2.9 million in 2023, a net difference of $3.2 million. This was primarily due to a partial redemption of the 2021 Senior Secured Notes in the second quarter of 2023.
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Other (Expense) Income, Net
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Other expense, net was $0.5 million in 2024 compared to other income $0.5 million in 2023, a net decrease of $1.0 million. The change was mostly due to the loss on the termination of an operating lease in 2024.
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Provision for Income Taxes
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Removed paragraphs (19)
Previous report
Our culture is built upon a set of values established by our founders, aligning the Company and its employees in a common vision. Our seven values are: Honor; Mission; Collaboration; Productivity; Willingness; Frugality; and Balance. Our approach has focused on trust and fairness for users enabling game developers to focus on what they do best: build great content.
Previous report
Historically, our top games and related developers have accounted for a substantial portion of our revenue earned from the Skillz platform. For the years ended December 31, 2023 and 2022, the games Solitaire Cube, 21 Blitz (each developed by Tether Studios, LLC (“Tether”)) and Blackout Bingo (developed by Big Run Studios Inc. (“Big Run”)) combined accounted for 70% and 71% of our revenue, respectively. For the years ended December 31, 2023 and 2022, Tether accounted for 44% and 39% of our revenue, respectively. For the years ended December 31, 2023 and 2022, Big Run accounted for 36% and 41% of our revenue, respectively. Our top titles rotate over time as more games generate success on the Skillz platform.
Previous report
Prizes include cash, Bonus Cash, physical merchandise and items sponsored by third-parties. Prizes for the year ended December 31, 2023 consisted of approximately 83% cash and 17% Bonus Cash. Prizes for the year ended December 31, 2022 consisted of approximately 92% cash and 8% Bonus Cash. Physical merchandise and items sponsored by third-parties were de minimis for the periods presented.
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We expect our general and administrative expenses to decrease for the foreseeable future as we reposition the Company for profitability. We do not anticipate that we will grow headcount significantly and expect to reduce certain general and administrative expenses including professional service expenses, investor relations activities, and other administrative services.
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During the year ended December 31, 2022 we recorded an impairment of goodwill and long-lived assets of $168.1 million. The impairments were driven primarily by a sharp decrease in our stock price and market capitalization that we experienced throughout the year, as well as downward adjustments to our operating forecasts, which were considered triggering events for our goodwill and long-lived assets and indicated the assets may not be recoverable.
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Interest expense, net
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Interest expense, net decreased by $23.7 million, to $2.9 million in 2023 from $26.5 million in 2022. The decrease was primarily driven by the redemption of a portion of the principal amount of the 2021 Senior Secured Notes in 2022 and the repurchase of debt in the second quarter of 2023. Additionally, we had an increase of $4.5 million in interest income primarily from investment in marketable securities.
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Other income (expense), net
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Other income, net increased by $0.4 million to $0.5 million in other income in 2023 from $0.1 million in other income in 2022. The change was not material.
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Provision (benefit) for income taxes
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Provision for income taxes decreased by $0.6 million to $0.2 million in 2023 from a benefit from income taxes of $0.3 million. The decrease was primarily driven by a discrete benefit related to the partial release of valuation allowance related to the acquisition of Aarki in the prior period.
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(1)For the year ended 2022, amount includes stock-based compensation recognized for the cancellation of the Chief Executive Officers’ award of 805,000 performance share units granted on September 14, 2021 (the “CEO Performance Stock Units”).
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(3)For the year ended 2022, amount includes restructuring charges related to employee termination benefits.
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(4)For the year ended 2022, amounts represent one-time nonrecurring expenses related to IPO bonuses for certain employees, net of amounts forfeited by terminated employees.
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We have two reportable business segments; the Skillz segment and the Aarki segment. Skillz’ corporate operations primarily support Skillz and are included in the Skillz segment. Likewise, Aarki has its own corporate operations, which are included in the Aarki segment.
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The change from one to two reportable business segments was effective beginning in the fourth quarter of 2023. To provide comparability between reporting periods, results for fiscal years 2023 and 2022 have been recast to reflect this change.
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The following table provides Segment Revenue and Segment Adjusted EBITDA for each of our segments.
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Net cash used in financing activities was $10.6 million for the year ended December 31, 2022, which was primarily due to the $7.3 million payment for redemption of senior secured notes, $2.0 million in payments for debt issuance costs and $2.6 million in principal payments on finance lease obligations.
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We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
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The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K.
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The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Form 10-K. This section generally discusses the results of our operations for the year ended
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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 Skillz Inc. (for purposes of this section, “Skillz,” “we,” “us” and “our”). MD&A is provided as a supplement and should be read in conjunction with the consolidated financial statements and related notes included in Part II, Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in Part I, Item 1A, “Risk Factors”. 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.
Current wording
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 Skillz Inc. (the “Company,” “Skillz,” “we,” “us,” “our,” and “its”). MD&A is provided as a supplement and should be read in conjunction with the consolidated financial statements and related notes included in Part II, Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in Part I, including Note Regarding Forward-Looking Statements and Item 1A, “Risk Factors”. 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.
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We operate a marketplace that connects the world through competition, serving both developers and users. Our platform enables fair, fun and competitive gaming experiences and the trust we foster with users is the foundation upon which our community is built. We believe our marketplace benefits from a powerful network effect: compelling content attracts users to our platform, while the increasing size of our audience attracts more developers to create new interactive experiences on our platform.
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We operate a marketplace that connects the world through competition, serving both developers and users. Our platform enables fair, fun and competitive gaming experiences and the trust we foster with users is the foundation upon which our community is built.
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Skillz was founded in 2012 by Andrew Paradise and Casey Chafkin with the vision to make eSports accessible to everyone. For the year ended December 31, 2023, the platform had over 1.0 million monthly active users (“MAUs”) and hosted an average of over 2.8 million daily tournaments, including 0.61 million paid entry daily tournaments, offering over $65.1 million in prizes each month.
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For the year ended December 31, 2024, the platform had over 816 thousand monthly active users (“MAUs”) and hosted an average of over 1.1 million daily tournaments, including an average of approximately 405 thousand paid entry daily tournaments, offering over $41.2 million in prizes each month.
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Our technology capabilities are industry-leading and provide the tools necessary for developers to compete with the largest and most sophisticated mobile game developers in the world. Our easy-to-integrate software development kit (“SDK”) and developer console allow our developers to monitor, integrate and update their games seamlessly over the air. We ingest and analyze over 300 data points from each game play session, enhancing our data-driven algorithms and LiveOps systems. Moreover, we have developed a robust platform enabling fun, fair and meaningful competitive gameplay.
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Our technological capabilities provide the tools necessary for developers to compete in the marketplace. Our software development kit (“SDK”) allows developers to monitor, integrate and update their games seamlessly over the air. We ingest and analyze hundreds of data points from each game play session, enhancing our data-driven algorithms and LiveOps systems. Moreover, we have developed a platform enabling fun, fair and meaningful competitive gameplay.
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(1) “GMV” or “Gross Marketplace Volume” means the total entry fees paid by users for contests hosted on Skillz’s platform. Total entry fees include entry fees paid by end-users using cash depo sits, prior winnings from end-users’ accounts that have not been withdrawn and end-user incentives used to enter paid entry fee contests.
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(1) “GMV” or “Gross Marketplace Volume” represents the total entry fees paid by users for contests hosted on Skillz’s platform. Total entry fees include entry fees paid by end-users using cash depo sits, prior winnings from end-users’ accounts that have not been withdrawn and end-user incentives used to enter paid entry fee contests.
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(2) “Paying Monthly Active Users” or “PMAUs” means the number of end-users who entered into a paid contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period.
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(2) “Paying Monthly Active Users” or “PMAUs” represent the number of end-users who entered into a paid contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period.
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(3) “Monthly Active Users” or “MAUs” means the number of playing end-users who entered into a paid or free contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period.
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(3) “Monthly Active Users” or “MAUs” represent the number of playing end-users who entered into a paid or free contest hosted on our platform at least once in a month, averaged over each month in the period.
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(4) “Average GMV Per Paying Monthly Active User” means the average GMV in a given month divided by Paying MAUs in that month, averaged over the period.
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(4) “Average GMV Per Paying Monthly Active User” represents the average GMV in a given month divided by Paying MAUs in that month, averaged over the period.
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(5) “Average GMV Per Monthly Active User” means the average GMV in a given month divided by MAUs in that month, averaged over the period.
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(5) “Average GMV Per Monthly Active User” represents the average GMV in a given month divided by MAUs in that month, averaged over the period.
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(6) “Average Revenue Per Paying Monthly Active User” or “ARPPU” means the average revenue in a given month divided by Paying MAUs in that month, averaged over the period and does not include a deduction for end-user incentives that are included in sales and marketing expense.
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(6) “Average Revenue Per Paying Monthly Active User” or “ARPPU” represents the average revenue in a given month divided by Paying MAUs in that month, averaged over the period and does not include a deduction for end-user incentives, which are included in sales and marketing expenses.
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(7) “Average Revenue Per Monthly Active User” or “ARPU” means the average revenue in a given month divided by MAUs in that month, averaged over the period and does not include a deduction for end-user incentives that are included in sales and marketing expense.
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(7) “Average Revenue Per Monthly Active User” or “ARPU” represents the average revenue in a given month divided by MAUs in that month, averaged over the period and does not include a deduction for end-user incentives, which are included in sales and marketing expenses.
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(8) Amount reflects the average end-user incentives included in sales and marketing expense in a given month divided by PMAUs in that month, averaged over the period.
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(8) Amount reflects the average end-user incentives included in sales and marketing expenses in a given month divided by PMAUs in that month, averaged over the period.
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(9) Amount reflects the average end-user incentives included in sales and marketing expense in a given month divided by MAUs in that month, averaged over the period.
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(9) Amount reflects the average end-user incentives included in sales and marketing expenses in a given month divided by MAUs in that month, averaged over the period.
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Over the course of 2022 and 2023, our focus was on driving higher efficiency from our marketing investment by (1) reducing spend on low-return engagement marketing programs, which we expect will result in lower engagement marketing as a percentage of revenue and (2) driving UA efficiency by optimizing spend across networks, and driving higher organic traffic. To the extent we reduce engagement marketing spend, we expect to reduce our Bonus Cash end-user incentives in proportion to such overall engagement marketing reduction.
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Over the course of the fiscal years ending December 31, 2024 and 2023, our focus was on driving higher efficiency from our marketing investment by (1) reducing spend on low-return engagement marketing programs, which we expect will result in lower engagement marketing as a percentage of revenue and (2) driving UA efficiency by optimizing spend across networks, and driving higher organic traffic. To the extent we reduce engagement marketing spend, we expect to reduce our Bonus Cash end-user incentives in proportion to such overall engagement marketing reduction.
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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 the platform. Decreases in engagement marketing could result in lower revenue as paying users no longer receive those end-user incentives, which include Bonus Cash which can only be used to enter into paid contests.
Current wording
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 could 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 the platform. Assuming acquisition cost per user is constant, decreases in UA marketing expense typically result in lower revenue as a result of having fewer new paying users. UA marketing spend during fiscal year 2023 was approximately $29.4 million, as compared to approximately $117.3 million in fiscal year 2022.The reduction in UA marketing and engagement marketing expenses during fiscal year 2022 and 2023 has resulted in a substantial reduction in revenue and is expected to continue to result in a reduction in revenue. We are currently unable to reasonably estimate the quantitative impact, or range of impact, that reductions in UA marketing and engagement marketing will have on forward-looking revenue as a result of the number of interrelated factors impacting revenue, including, but not limited to, retention of existing users on the platform, ARPPU, efficacy of various engagement 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.
Current wording
User acquisition (“UA”) marketing is a sales and marketing expense to acquire new paying users to our platform. UA marketing spend during fiscal year 2024 was approximately $18.4 million, as compared to approximately $29.4 million in fiscal year 2023. The reduction in UA marketing and engagement marketing expenses in fiscal year ending December 31, 2024 compared to 2023 has resulted in a substantial reduction in revenue and is expected to continue to result in a reduction in revenue. We are currently unable to reasonably estimate the quantitative impact, or range of impact, that reductions in UA marketing and engagement marketing will have on forward-looking revenue as a result of the number of interrelated factors impacting revenue, including, but not limited to, retention of existing users on the platform, ARPPU, efficacy of various engagement 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.
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(1) ‘Prior winnings’ include cash and Bonus Cash that are in the end-user’s account as a result of winnings from competitions. For the year ended December 31, 2023, prior winnings from cash and Bonus Cash were 83% and 17%, respectively. For the year ended December 31, 2022, prior winnings from cash and Bonus Cash were 92% and 8%, respectively.
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(1) ‘Prior winnings’ include cash and Bonus Cash that are in the end-user’s account as a result of winnings from competitions. For the year ended December 31, 2024, prior winnings from cash and Bonus Cash were 84% and 16%, respectively. For the year ended December 31, 2023, prior winnings from cash and Bonus Cash were 83% and 17%, respectively.
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(3) ‘End-user incentives’ are based on amounts recorded as a reduction of revenue or sales and marketing expense during the respective period. End-user incentives primarily consist of (i) Bonus Cash, (ii) Ticketz (which can be redeemed for Bonus Cash) and (iii) promotional offers. Bonus Cash relates to all Bonus Cash that has been lost during the period (i.e., when the related cost has been incurred by the Company). Refer to Note 2, Summary of Significant Accounting Policies, of our consolidated financial statements for further information.
Current wording
(3) ‘End-user incentives’ are based on amounts recorded as a reduction of revenue or sales and marketing expenses during the respective period. End-user incentives primarily consist of (i) Bonus Cash, (ii) Ticketz (which can be redeemed for Bonus Cash) and (iii) promotional offers. Bonus Cash relates to all Bonus Cash that has been lost during the period (i.e., when the related cost has been incurred by the Company). Refer to Note 2, Summary of Significant Accounting Policies, of our consolidated financial statements for further information.
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•The scale, growth and engagement of the users — As we continue to acquire users, our ability to match comparable players, on both skill level and tournament template, in a fair and timely manner improves. Better matching leads to stronger engagement and the ability to create larger tournaments with more profitable take rates. This creates a stickier, more engaging, and continuously improving experience for our players, which in turn attracts more players to our platform, creating a positively reinforcing cycle leading to ever-improving gaming experiences.
Current wording
•The scale, growth and engagement of the users — As we continue to acquire users, our ability improves to match comparable players, on both skill level and tournament template, in a fair and timely manner. Better matching leads to stronger engagement and the ability to create larger tournaments with more profitable take rates. This creates a stickier, more engaging, and continuously improving experience for our players, which in turn attracts more players to our platform, creating a positively reinforcing cycle leading to ever-improving gaming experiences.
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•Product-first philosophy and data science capabilities — We have built a culture that puts product first, driving our impact with users and developers and then scaling marketing investment. In 2023, 38% of our salary costs were spent on product development. Our easy-to-integrate SDK contains over 200 features in a less than 16-MB package which allows for over-the-air upgrades. Our intuitive Developer Console dashboard enables our developers to rapidly integrate and monitor the performance of their games. Our LiveOps system enables us to manage and optimize the user experience across the thousands of games on our platform. We collect over 300 data points during each gameplay session to feed our big data assets which augment all elements of our platform. Our key data science technologies drive our player rating and matching, anti-cheat and anti-fraud, and user experience personalization engine.
Current wording
•Product-first philosophy and data science capabilities — We have built a culture that puts product first, driving our impact with users and developers and then scaling marketing investment. Our easy-to-integrate SDK contains hundreds of features in a small package which allows for over-the-air upgrades. Our intuitive Developer Console dashboard enables our developers to rapidly integrate and monitor the performance of their games. Our LiveOps system enables us to manage and optimize the user experience across the thousands of games on our platform. We collect hundreds of data points during each gameplay session to feed our big data assets which augment all elements of our platform. Our key data science technologies drive our player rating and matching, anti-cheat and anti-fraud, and user experience personalization engine.
Previous wording
•Our unit economics — Our proprietary and highly scalable software platform produces revenue at a low direct cost (i.e. direct software and server costs), contributing to our gross margins. Once acquired, each user cohort contributes to revenue over its life such that at three months, approximately 20% of users in a cohort continue to be paying users and the balance of PMAUs have churned. Thereafter, our retention curve continues to flatten with a limited portion of users continuing to contribute to revenue in each cohort for subsequent years. A cohort is all the users acquired in the period presented. A user is considered part of a cohort based on the first time they make a deposit and enter a paid tournament. Once a user is considered part of a cohort, they are always counted in that cohort.
Current wording
•Our unit economics — Our proprietary and highly scalable software platform produces revenue at a low direct cost (i.e. direct software and server costs), contributing to our gross margins. Once acquired, each user cohort contributes to revenue over its life. A cohort is all the users acquired in the period presented. A user is considered part of a cohort based on the first time they make a deposit and enter a paid tournament. Once a user is considered part of a cohort, they are always counted in that cohort.
Previous wording
By utilizing the Skillz monetization services, game developers can enhance the player experience by enabling them to compete in head-to-head matches, live tournaments, leagues, and charity tournaments and increase player retention through referral bonus programs, loyalty perks, on-system achievements and Bonus Cash. Skillz provides developers with a 3SDK that they can download and integrate with their existing games. The SDK serves as a data interface between Skillz and the game developers that enables Skillz to provide monetization services to the developer. Specifically, these monetization services include end-user registration services, player matching, fraud and fair play monitoring, and billing and settlement services. The SDK and Skillz monetization services provide the following key benefits to the developers:
Current wording
By utilizing the Skillz monetization services, game developers can enhance the player experience by enabling them to compete in head-to-head matches, live tournaments and leagues and increase player retention through referral bonus programs, loyalty perks, on-system achievements and Bonus Cash. Skillz provides developers with a SDK that they can download and integrate with their existing games. The SDK serves as a data interface between Skillz and the game developers that enables Skillz to provide monetization services to the developer. Specifically, these monetization services include end-user registration services, player matching, fraud and fair play monitoring, and billing and settlement services. The SDK and Skillz monetization services provide the following key benefits to the developers:
Previous wording
•Improved end-user retention by rewarding the most loyal players with Ticketz which can be redeemed in the Skillz virtual store and are earned in every match and can be redeemed for prizes or credits to be used towards future paid entry fee tournaments;
Current wording
•Improved end-user retention by rewarding the most loyal players with Ticketz which can be redeemed in the Skillz virtual store and are earned in qualifying matches and can be redeemed for prizes or credits to be used towards future paid entry fee tournaments;
Previous wording
We incur payment processing costs on user deposits. We also incur costs directly related to servicing end-user support tickets on behalf of the game developer that are logged by users directly within the Skillz SDK. These support costs include an allocation of the facilities expense, such as rent, maintenance and utilities costs according to headcount, needed to service these tickets. We use a third party as our cloud computing service; we incur server and software costs as a direct result of running our SDK in our developers’ games. We also incur costs related to the amortization of intangible assets which include developed technology.
Current wording
We incur payment processing costs on user deposits. We also incur costs directly related to servicing end-user support tickets on behalf of the game developer that are logged by users directly within the Skillz SDK. These support costs include an allocation of the facilities expense, such as rent, maintenance and utilities costs according to headcount, needed to service these tickets. We use a third party as our cloud computing service; we incur server and software costs as a direct result of running our SDK in our developers’ games. We also incur costs related to the amortization of intangible assets related to developed technology directly used to produce the Company's products or services.
Previous wording
Sales and marketing expenses consist primarily of direct advertising costs, engagement marketing expenses that are not recorded as a reduction of revenue, UA marketing expenses and amortization of intangible assets which include customer relationships. Sales and marketing expenses also include allocations of rent, maintenance and utilities costs which are allocated according to headcount. Personnel related expenses consist of salaries, benefits, and stock-based compensation. We expect sales and marketing expenses will fluctuate both in terms of absolute dollars and as a percentage of revenue in the future.
Current wording
Sales and marketing expenses consist primarily of direct advertising costs, engagement marketing expenses that are not recorded as a reduction of revenue, and UA marketing expenses. Sales and marketing expenses also include allocations based on headcount of rent, maintenance and utilities costs. Personnel related expenses consist of salaries, benefits, and stock-based compensation. We expect sales and marketing expenses will fluctuate both in terms of absolute dollars and as a percentage of revenue in the future.
Previous wording
General and administrative expenses consist of personnel-related expenses for our corporate, executive, finance, human resources and other administrative functions, expenses for outside professional services, and an allocation for rent, maintenance and utilities costs which are allocated according to headcount. Personnel related expenses consist of salaries, benefits, and stock-based compensation. General and administrative expenses also include expenses related to a loss contingency accrual (for pending legal matters).
Current wording
General and administrative expenses consist of personnel-related expenses for our corporate, executive, legal, accounting, finance, people operations and other administrative functions, expenses for outside professional services, and an allocation for rent, maintenance and utilities costs, which are allocated based on headcount. Personnel related expenses consist of salaries, benefits, and stock-based compensation. General and administrative expenses also include expenses related to loss contingency accruals for pending legal matters, as applicable.
Previous wording
Revenue decreased by $117.6 million, or 44%, to $152.1 million in 2023 from $269.7 million in 2022. The decrease was primarily due to a decrease in the Company’s player base as our monthly active users decreased from 2.1 million in 2022 to 1.0 million in 2023. This decrease reflects the decrease of our UA marketing and engagement marketing spend of 75% and 45%, respectively from 2023 to 2022. The reduction in user acquisition and engagement marketing spend was driven to prioritize profitability over revenue growth in fiscal 2023. The Company intentionally reduced spend to achieve better user acquisition efficiency and eliminate lower-return engagement marketing programs. ARPU decreased 8% over the same period.
Current wording
Revenue decreased by $59.2 million, or 39%, to $92.9 million in 2024 from $152.1 million in 2023. This was primarily due to a reduction in the player base as our monthly active users were 0.8 million in 2024, lower by 0.2 million, or 22%, compared to 1.0 million in 2023. This was commensurate with the decreases in UA marketing and engagement marketing spend of 39% and 44% in 2024, respectively. Beginning in fiscal 2023, the Company reduced user acquisition marketing spend, which is primarily focused on acquiring new players and driving growth in order to improve efficiency and prioritizing profitability over top-line expansion. In parallel, the Company also reduced engagement marketing spend, which is primarily focused on player retention, to eliminate programs that were not profitable on a dollar-for-dollar basis. The Company intentionally reduced spend to achieve better user acquisition efficiency and eliminate lower-return engagement marketing programs. ARPU decreased 19% over the same period.
Previous wording
Cost of revenue decreased by $15.3 million, or 50%, to $15.4 million in 2023 from $30.7 million in 2022. The decrease in cost of revenue was primarily driven by a reduction in amortization and depreciation due to the write off of intangible assets in the second half of the year-ended December 31, 2022, and continued reductions in payment processing and customer support personnel costs. Cost of revenue as a percentage of revenue decreased to 10% in 2023 from 11% in 2022.
Current wording
Cost of revenue decreased by $2.0 million, or 13%, to $13.4 million in 2024 from $15.4 million in 2023. This was primarily driven by a reduction in customer support personnel and payment processing costs. Cost of revenue as a percentage of revenue increased to 14% in 2024 from 10% in 2023.
Previous wording
Research and development costs decreased by $24.2 million, or 46%, to $28.1 million in 2023 from $52.3 million in 2022. The decrease was primarily driven by a $24.6 million decrease in research and development employee related costs, due to a 14% reduction in headcount in research and development departments from the restructure in 2022.
Current wording
Research and development costs decreased by $11.4 million, or 41%, to $16.7 million in 2024 from $28.1 million in 2023. This was primarily driven by a $8.0 million decrease in research and development employee related costs.
Previous wording
Sales and marketing costs decreased by $154.1 million, or 56%, to $122.9 million in 2023 from $277.0 million in 2022. The decrease was attributable primarily to 75% and 45% decreases in UA marketing and engagement marketing spend, respectively. This intentional decrease was driven by the strategic decision to prioritize profitability over revenue growth in 2023. UA marketing and engagement marketing decreased by $87.9 million and $52.3 million, respectively. Additionally, employee related expenses decreased $9.4 million, due to a 15% reduction in headcount in sales and marketing departments from the restructure in 2022.
Current wording
Sales and marketing costs decreased by $46.5 million, or 38%, to $76.4 million in 2024 from $122.9 million in 2023. This was primarily due to decreases of 39% and 44% in UA marketing and engagement marketing spend in 2024, respectively, compared to prior periods. This intentional decrease was driven by the strategic decision to prioritize profitability over revenue growth starting in the fiscal year ending December 31, 2023. UA marketing and engagement marketing decreased by $11.5 million and $29.0 million, respectively in 2024 and 2023. Additionally, employee related expenses decreased $3.2 million, or 15% due to a reduction in headcount in the sales and marketing departments during 2024.
Previous wording
General and administrative costs decreased by $66.4 million, or 41%, to $96.7 million in 2023 from $163.0 million in 2022. The decrease was primarily driven by a $76.8 million decrease in employee related expenses due to a 9% reduction in headcount in general and administrative departments from the restructure in 2022. This decrease was offset by an increase in legal fees of $7.6 million relating to ongoing legal matters.
Current wording
General and administrative costs decreased by $17.8 million, or 18%, to $78.9 million in 2024 from $96.7 million in 2023. This was primarily driven by a $9.3 million decrease in employee related expenses due to a reduction in headcount in general and administrative departments.
Previous wording
During the year ended December 31, 2023 we recorded an impairment of goodwill and long-lived assets of $3.3 million. The impairments were driven primarily by one of our investments in non-marketable securities we hold of a privately held company on account of significant concerns related to the private company’s ability to continue as a going concern.
Current wording
During the year ended December 31, 2024, there was no impairment of goodwill or long-lived assets. During the year ended December 31, 2023, we recorded an impairment of $3.3 million related to goodwill and long-lived assets. The impairment was primarily driven by an investment in non-marketable securities we held of a privately held company on account of significant concerns related to the private company’s ability to continue as a going concern.
Previous wording
The gain on debt extinguishment of $15.2 million and $2.6 million for the years ended December 31, 2023 and 2022, respectively, was related to the 2021 Senior Secured Notes. Refer to Note 8, Long-Term Debt, of the notes to the consolidated financial statements for further discussion.
Current wording
During the year ended December 31, 2024, there was no gain on debt extinguishment. The gain on debt extinguishment of $15.2 million for the year ended December 31, 2023 was related to the 2021 Senior Secured Notes. Refer to Note 8, Long-Term Debt, of the notes to the consolidated financial statements for further discussion.
Previous wording
The change in fair value of warrant liabilities decreased by $5.7 million to $0.3 million in 2023 from $6.0 million in 2022. Refer to Note 12, Common Stock Warrants, of the notes to the consolidated financial statements for further discussion.
Current wording
The change in fair value of warrant liabilities decreased by $0.3 million to less than $0.1 million in 2024 from $0.3 million in 2023. Refer to Note 12, Common Stock Warrants, of the notes to the consolidated financial statements for further discussion.
Previous wording
“Adjusted EBITDA” is defined as net income (loss), excluding interest income (expense), net; change in fair value of common stock warrant liabilities; other income (expense), net; provision for (benefit from) income taxes; depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net loss from time to time, including, but not limited to impairment charges, loss contingency accruals, restructuring charges and one-time nonrecurring expenses, as they are not indicative of business operations. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. Our management believes Adjusted EBITDA is useful in evaluating its operating performance and is a similar measure reported by publicly-listed U.S. competitors, and regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. By providing this non-GAAP measure, we intend to provide investors with an additional tool to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that when evaluating Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating this measure. In addition, our presentation of this measure should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same manner.
Current wording
“Adjusted EBITDA” is defined as net income (loss), excluding interest income (expense), net; change in fair value of common stock warrant liabilities; other income (expense), net; provision for (benefit from) income taxes; depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net loss from time to time, including, but not limited to charges related to impairment of goodwill and long-lived assets, litigation accruals, loss contingency accruals, gains on extinguishment of debt, gains from litigation settlements, restructuring charges and one-time nonrecurring expenses, as they are not indicative of business operations. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, GAAP. Our management believes Adjusted EBITDA is useful in evaluating its operating performance and is a similar measure reported by publicly-listed U.S. competitors, and regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. By providing this non-GAAP measure, we intend to provide investors with an additional tool to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that when evaluating Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating this measure. In addition, our presentation of this measure should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, as all companies may not calculate Adjusted EBITDA in the same manner.
Previous wording
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.
Current wording
In light of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA on a supplemental basis.
Previous wording
(2)For the year ended 2022, amount includes impairment of goodwill and long-lived assets related to the developed technology, customer relationships, computer equipment, and lease ROU.
Current wording
(1)For the year ended 2023, amount includes impairment of goodwill and long-lived assets.
Previous wording
(5)For the year ended 2023, amount represents the settlement of a litigation matter relating to a former employee as discussed in Note 19, Subsequent Events.
Current wording
(2)For the year ended 2023, amount represents the settlement of a litigation matter relating to a former employee.
Previous wording
We evaluate the performance of our segments based on Segment Revenue and Segment Adjusted EBITDA. Segment Adjusted EBITDA is indicative of operational performance and is monitored by management to evaluate past performance and identify actions required to improve profitability.
Current wording
We have two reportable business segments: Skillz and Aarki. We evaluate the performance of our segments based on revenue and Adjusted EBITDA to assess operational performance and identify actions required to improve profitability.
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Previous report — wording carried elsewhere
See Note 2, Summary of Significant Accounting Policies.